I. Maritime Transactions.

A. Real and Hypothecary Nature

- Luzon Stevedoring Corp. vs. CA [G.R. No. L-58897, Dec. 3, 1987]

GANCAYCO, J.
The real nature of the liability of the ship owner or agent is embodied in the Code of
Commerce. Articles 587, 590 and 837 are intended to limit the liability of the ship
owner, provided that the owner or agent abandons the vessel. Although Article 837
does not specifically provide that in case of collision there should be abandonment, to
enjoy such limited liability, said article is a mere amplification of the provisions of
Articles 587 and 590 which makes it a mere superfluity.

FACTS: A maritime collision occurred between the tanker CAVITE owned by Luzon
Stevedoring Corporation (LSCO) and MV Fernando Escano (a passenger ship) owned by
Escano, as a result the passenger ship sunk. An action in admiralty was filed by Escano
against Luzon. The trial court held that LSCO Cavite was solely to blame for the collision
and held that Luzon’s claim that its liability should be limited under Article 837 of the
Code of Commerce has not been established. The Court of Appeals affirmed the trial
court. The SC also affirmed the CA. Upon two motions for reconsideration, the Supreme
Court gave course to the petition.

ISSUE: Whether or not in order to claim limited liability under Article 837 of the Code of
Commerce, it is necessary that the owner abandon the vessel

RULING: Yes, abandonment is necessary to claim the limited liability wherein it shall be
limited to the value of the vessel with all the appurtenances and freightage earned in
the voyage. However, if the injury was due to the ship owner’s fault, the ship owner
may not avail of his right to avail of limited liability by abandoning the vessel. The real
nature of the liability of the ship owner or agent is embodied in the Code of Commerce.
Articles 587, 590 and 837 are intended to limit the liability of the ship owner, provided
that the owner or agent abandons the vessel. Although Article 837 does not specifically
provide that in case of collision there should be abandonment, to enjoy such limited
liability, said article is a mere amplification of the provisions of Articles 587 and 590
which makes it a mere superfluity. The exception to this rule in Article 837 is when the
vessel is totally lost in which case there is no vessel to abandon, thus abandonment is
not required. Because of such loss, the liability of the owner or agent is extinguished.
However, they are still personally liable for claims under the Workmen’s Compensation
Act and for repairs on the vessel prior to its loss. In case of illegal or tortious acts of the
captain, the liability of the owner and agent is subsidiary. In such cases, the owner or
agent may avail of Article 837 by abandoning the vessel. But if the injury is caused by
the owner’s fault as where he engages the services of an inexperienced captain or
engineer, he cannot avail of the provisions of Article 837 by abandoning the vessel. He
is personally liable for such damages. In this case, the Court held that the petitioner is
at fault and since he did not abandon the vessel, he cannot invoke the benefit of Article
837 to limit his liability to the value of the vessel, all appurtenances and freightage
earned during the voyage.
 - Monarch Insurance vs. CA [G.R. No. 92735, June 8, 2000]

MONARCH INSURANCE CO., INC vs. COURT OF APPEALS and ABOITIZ SHIPPING
CORPORATION
G.R. No. 92735. June 8, 2000

FACTS:
Monarch and Tabacalera are insurance carriers of lost cargoes. They indemnified the
shippers and were consequently subrogated to their rights, interests and actions against
Aboitiz, the cargo carrier. Because Aboitiz refused to compensate Monarch, it filed two
complaints against Aboitiz which were consolidated and jointly tried.

Aboitiz rejected responsibility for the claims on the ground that the sinking of its cargo
vessel was due to force majeure or an act of God. Aboitiz was subsequently declared as
in default and allowed Monarch and Tabacalera to present evidence ex-parte.

ISSUE:
Whether or not the doctrine of limited liability applies in the instant case.

HELD:
Yes.
The failure of Aboitiz to present sufficient evidence to exculpate itself from fault and/or
negligence in the sinking of its vessel in the face of the foregoing expert testimony
constrains us to hold that Aboitiz was concurrently at fault and/or negligent with the
ship captain and crew of the M/V P. Aboitiz. [This is in accordance with the rule that in
cases involving the limited liability of shipowners, the initial burden of proof of
negligence or unseaworthiness rests on the claimants. However, once the vessel owner
or any party asserts the right to limit its liability, the burden of proof as to lack of privity
or knowledge on its part with respect to the matter of negligence or unseaworthiness is
shifted to it. This burden, Aboitiz had unfortunately failed to discharge.] That Aboitiz
failed to discharge the burden of proving that the unseaworthiness of its vessel was not
due to its fault and/or negligence should not however mean that the limited liability rule
will not be applied to the present cases. The peculiar circumstances here demand that
there should be no strict adherence to procedural rules on evidence lest the just claims
of shippers/insurers be frustrated. The rule on limited liability should be applied in
accordance with the latest ruling in Aboitiz Shipping Corporation v. General Accident
Fire and Life Assurance Corporation, Ltd.,] promulgated on January 21, 1993, that
claimants be treated as "creditors in an insolvent corporation whose assets are not
enough to satisfy the totality of claims against it."
 - Aboitiz vs. General Accident Fire [G.R. No. 100446, Jan. 21, 1993]

ABOITIZ SHIPPING CORPORATION, PETITIONER, v. GENERAL ACCIDENT FIRE AND

LIFE ASSURANCE CORPORATION, LTD., RESPONDENT. MELO, J.:
The real and hypothecary nature of maritime law simple means that the liability of the
carrier in connection with losses related to maritime contracts is confined to the vessel,
which is hypothecated for such obligations or which stands as the guaranty for their
settlement.

FACTS: Petitioner is a corporation engaged in the business of maritime trade as a

carrier. As such, it owned and operated the M/V P/ ABOITIZ, a common carrier that
sank on voyage from Hong Kong to Manila. Private respondent GAFLAC is a foreign
insurance company pursuing its remedy as a subrogee of several cargo consignees
whose respective cargo sank with the said vessel and for which it has priory paid. The
sinking of vessel gave rise to filling of suit to recover the lost cargo either by shippers,
their successors-in-interest, or the cargo insurers like GAFLAC as subrogees. The
sinking was initially investigated by the Board of Marine Inquiry, which found that such
sinking was due to fortuitous event.

ISSUE: Whether or not the doctrine of limited liability is applicable to the case.

RULING: The real and hypothecary nature of maritime law simple means that the
liability of the carrier in connection with losses related to maritime contracts is confined
to the vessel, which is hypothecated for such obligations or which stands as the
guaranty for their settlement. It has its origin by reason of the conditions and risks
attending maritime trade in its earliest years when such trade was replete with
innumerable and unknown hazards since vessels had to go through largely uncharted
waters to ply their trade. Thus, the liability of the vessel owner and agent arising from
the operation of such vessel were confined to the vessel itself, its equipment, freight
and insurance, if any, which limitation served to induce capitalist into effectively
wagering their resources against consideration of the large attainable in the trade
 - Negros Navigation vs. CA [G.R. No. 110398, Nov. 7, 1997]

In April of 1980, private respondent Ramon Miranda purchased from the Negros
Navigation Co., Inc. four special cabin tickets (#74411, 74412, 74413 and 74414) for
his wife, daughter, son and niece who were going to Bacolod City to attend a family
reunion. The tickets were for Voyage No. 457-A of the M/V Don Juan, leaving Manila at
1:00 p.m. on April 22, 1980.

The ship sailed from the port of Manila on schedule.

At about 10:30 in the evening of April 22, 1980, the Don Juan collided off the Tablas
Strait in Mindoro, with the M/T Tacloban City, an oil tanker owned by the Philippine
National Oil Company (PNOC)

As a result, the M/V Don Juan sank. Several of her passengers perished in the sea
tragedy. The bodies of some of the victims were found and brought to shore, but the
four members of private respondents' families were never found.

Private respondents filed a complaint on July 16, 1980 in the Regional Trial Court of
Manila, Branch 34, against the Negros Navigation, the Philippine National Oil Company
(PNOC), and the PNOC Shipping and Transport Corporation (PNOC/STC), seeking
damages for the death of Ardita de la Victoria Miranda, 48, Rosario V. Miranda, 19,
Ramon V. Miranda, Jr., 16, and Elfreda de la Victoria, 26.

In its answer, petitioner admitted that private respondents purchased ticket that the
ticket numbers were listed in the passenger manifest; and that the Don Juan left Pier 2,
North Harbor, Manila on April 22, 1980 and sank that night after being rammed by the
oil tanker M/T Tacloban City, and that, as a result of the collision, some of the
passengers of the M/V Don Juan died.

Petitioner, however, denied that the four relatives of private respondents actually
boarded the vessel as shown by the fact that their bodies were never recovered.
Petitioner further averred that the Don Juan was seaworthy and manned by a full and
competent crew, and that the collision was entirely due to the fault of the crew of the
M/T Tacloban City.

On January 20, 1986, the PNOC and petitioner Negros Navigation Co., Inc. entered into
a compromise agreement whereby petitioner assumed full responsibility for the
payment and satisfaction of all claims arising out of or in connection with the collision
and releasing the PNOC and the PNOC/STC from any liability to it.

After trial, the court rendered judgment on February 21, 1991 in favor of the plaintiffs

On appeal, the Court of Appeals affirmed the decision of the Regional Trial Court with
modification.

Issues:
Whether the ruling in Mecenas v. Court of Appeals finding the crew members of
petitioner to be grossly negligent in the performance of their duties, is binding in this
case

Ruling:
The trial court held that the fact that the victims were passengers of the M/V Don Juan
was sufficiently proven by private respondent Ramon Miranda
Petitioner contends that the purchase of the tickets does not necessarily mean that the
alleged victims actually took the trip. Petitioner asserts that it is common knowledge
that passengers purchase tickets in advance but do not actually use them. Hence,
private respondent should also prove the presence of the victims on the ship. The
witnesses who affirmed that the victims were on the ship were biased and unreliable.

Private respondent Ramon Miranda testified that he personally took his family and his
niece to the vessel on the day of the voyage and stayed with them on the ship until it
was time for it to leave. There is no reason he should claim members of his family to
have perished in the accident just to maintain an action.

People do not normally lie about so grave a matter as the loss of dear ones. It would be
more difficult for private respondents to keep the existence of their relatives if indeed
they are alive than it is for petitioner to show the contrary. Petitioner's only proof is that
the bodies of the supposed victims were not among those recovered from the site of
the mishap. But so were the bodies of the other passengers reported missing not
recovered, as this Court noted in the Mecenas case.

Private respondent Miranda's testimony was corroborated by Edgardo Ramirez. Ramirez

was a seminarian and one of the survivors of the collision.

Petitioner casts doubt on Ramirez' testimony, claiming that Ramirez could not have
talked with the victims for about three hours and not run out of stories to tell, unless
Ramirez had a "storehouse" of stories.

Petitioner also points out that it took Ramirez three (3) days before he finally contacted
private respondent Ramon Miranda to tell him about the fate of his family. But it is not
improbable that it took Ramirez three days before calling on private respondent Miranda
to tell him about the last hours of Mrs. Miranda and her children and niece, in view of
the confusion in the days following the collision as rescue teams and relatives searched
for survivors.

Indeed, given the facts of this case, it is improper for petitioner to even suggest that
private respondents' relatives did not board the ill-fated vessel and perish in the
accident simply because their bodies were not recovered.

In finding petitioner guilty of negligence and in failing to exercise the extraordinary

diligence required of it in the carriage of passengers, both the trial court and the
appellate court relied on the findings of this Court in Mecenas v. Intermediate Appellate
Court, which case was brought for the death of other passengers. In that case it was
found that although the proximate cause of the mishap was the negligence of the crew
of the M/T Tacloban City, the crew of the Don Juan was equally negligent as it found...
that the latter's master, Capt. Rogelio Santisteban, was playing mahjong at the time of
collision, and the officer on watch, Senior Third Mate Rogelio De Vera, admitted that he
failed to call the attention of Santisteban to the imminent danger facing them. This
Court found that Capt. Santisteban and the crew of the M/V Don Juan failed to take
steps to prevent the collision or at least delay the sinking of the ship and supervise the
abandoning of the ship.

Petitioner Negros Navigation was found equally negligent in tolerating the playing of
mahjong by the ship captain and other crew members while on board the ship and
failing to keep the M/V Don Juan seaworthy so much so that the ship sank within 10 to
15 minutes of its impact with the M/T Tacloban City.
In addition, the Court found that the Don Juan was overloaded.

Taking these circumstances together, and the fact that the M/V Don Juan, as the faster
and better-equipped vessel, could have avoided a collision with the PNOC tanker, this
Court held that even if the Tacloban City had been at fault for failing to observe an...
internationally-recognized rule of navigation, the Don Juan was guilty of contributory
negligence.

Petitioner criticizes the lower court's reliance on the Mecenas case, arguing that,
although this case arose out of the same incident as that involved in Mecenas, the
parties are different and trial was conducted separately. Petitioner contends that the
decision in this case... should be based on the allegations and defenses pleaded and
evidence adduced in it or, in short, on the record of this case.

The contention is without merit. What petitioner contends may be true with respect to
the merits of the individual claims against petitioner but not as to the cause of the
sinking of its ship on April 22, 1980 and its liability for such accident, of which there can
only be one... truth. Otherwise, one would be subscribing to the sophistry: truth on one
side of the Pyrenees, falsehood on the other!

Adherence to the Mecenas case is dictated by this Court's policy of maintaining stability
in jurisprudence in accordance with the legal maxim "stare decisis et non quieta
movere"

Nor is it true that the trial court merely based its decision on the Mecenas case. The
trial court made its own independent findings on the basis of the testimonies of
witnesses, such as Senior Third Mate Rogelio de Vera, who incidentally gave
substantially the same testimony on... petitioner's behalf before the Board of Marine
Inquiry. The trial court agreed with the conclusions of the then Minister of National
Defense finding both vessels to be negligent.

Third. The next issue is whether petitioner is liable to pay damages notwithstanding the
total loss of its ship. The issue is not one of first impression. The rule is well-entrenched
in our jurisprudence that a shipowner may be held liable for injuries to passengers...
notwithstanding the exclusively real and hypothecary nature of maritime law if fault can
be attributed to the shipowner.

In the event the Philippine National Oil Company and/or the PNOC Shipping and
Transport Corporation pay or are required to pay all or a portion of the amounts
adjudged, petitioner Negros Navigation Co., Inc. shall reimburse either of them such
amount or amounts as either may... have paid, and in the event of failure of Negros
Navigation Co., Inc., to make the necessary reimbursement, PNOC and/or PNOC/STC
shall be entitled to a writ of execution without need of filing another action.
 - Philamgen vs. CA [116940, June 11, 1997]

THE PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY, INC. v. CA AND FELMAN

SHIPPING LINES. BELLOSILLO, J
Under Art. 1733 of the Civil Code, "common carriers, from the nature of their business
and for reasons of public policy, are bound to observe extraordinary diligence in the
vigilance over the goods and for the safety of the passengers transported by them,
according to all the circumstances of each case . . ." In the event of loss of goods,
common carriers are presumed to have acted negligently. FELMAN, the shipowner, was
not able to rebut this presumption.

FACTS: Coca-Cola Bottlers Philippines, Inc. loaded on board MV Asilda, a vessel owned
and operated by FELMAN, 7,500 cases of Coke softdrink bottles to be transported from
Zamboanga to Cebu for consignee Coca-Cola, Cebu. The vessel subsequently sank
bringing down her entire cargo with her including the 7,500 cases of Coke softdrink
bottles. PHILAMGEN paid Coca-Cola its claim of under the insurance contract. Claiming
its right of subrogation PHILAMGEN sought recourse against FELMAN. FELMAN
disclaimed liability for the loss.

ISSUE: Whether or not MV Asilda was unseaworthy when it left the port of Zamboanga.

RULING: Yes. MV Asilda was unseaworthy when it left the port of Zamboanga. The
proximate cause of the sinking of MV Asilda was its being top-heavy. Evidence shows
that around 2,500 cases of softdrink bottles were stowed on deck. Several days after
MV Asilda sank, around 2,500 empty Coca-Cola plastic cases were recovered near the
vicinity of the sinking. Considering that the ship's hatches were properly secured, the
empty Coca-Cola cases recovered could have come only from the vessel's deck cargo. It
is settled that carrying a deck cargo raises the presumption of unseaworthiness unless it
can be shown that the deck cargo will not interfere with the proper management of the
ship. However, in this case it was established that MV Asilda was not designed to carry
substantial amount of cargo on deck. The inordinate loading of cargo deck resulted in
the decrease of the vessel's metacentric height 7 thus making it unstable. The strong
winds and waves encountered by the vessel are but the ordinary vicissitudes of a sea
voyage and as such merely contributed to its already unstable and unseaworthy
condition. Art. 587 of the Code of Commerce is not applicable to the case at bar. The
ship agent is liable for the negligent acts of the captain in the care of goods loaded on
the vessel. This liability however can be limited through abandonment of the vessel, its
equipment and freightage as provided in Art. 587. Nonetheless, there are exceptional
circumstances wherein the ship agent could still be held answerable despite the
abandonment, as where the loss or injury was due to the fault of the ship owner and
the captain. The international rule is to the effect that the right of abandonment of
vessels, as a legal limitation of a ship owner’s liability, does not apply to cases where
the injury or average was occasioned by the ship owner’s own fault. It must be stressed
at this point that Art. 587 speaks only of situations where the fault or negligence is
committed solely by the captain. Where the ship owner is likewise to be blamed, Art.
587 will not apply, and such situation will be covered by the provisions of the Civil Code
on common carrier. Under Art 1733 of the Civil Code, "common carriers, from the
nature of their business and for reasons of public policy, are bound to observe
extraordinary diligence in the vigilance over the goods and for the safety of the
passengers transported by them, according to all the circumstances of each case . . ."
In the event of loss of goods, common carriers are presumed to have acted negligently.
FELMAN, the shipowner, was not able to rebut this presumption

- Luzon Stevedoring vs. CA [G.R. No. 58897, Dec. 3, 1988]

 - Manila Steamship vs. Abdulhaman [G.R. No. L-9534, Sept. 29, 1986]

G.R. No. 9534 ; September 29, 1956 ; 100 Phil. 32

PRINCIPLE/S:
1. GR: Limited Liability Rule
Exception: Injury or death to a passenger is due either to the fault of the ship owner, or
to the concurring negligence of the ship owner and the captain (NOTE: There are other
exceptions aside from the one stated in this case)

2. Civil tort is different from maritime tort resulting in a collision at sea.

CIVIL TORT MARITIME TORT

Governed by the Civil Code
Effect: ER may escape liability if s/he
exercised due diligence in the selection and
supervision of the vessel’s officers and crew
Governed by Articles 826-939 of the Code of
Commerce
Effect: The shipowner is directly and
primarily responsible in tort resulting in a
collision at sea, and it may not escape liability
on the ground that s/he exercised due
diligence in the selection and supervision of
the vessel’s officers and crew

FACTS: Abdulhaman together with his family boarded M/L Consuelo V. The master and
the engineer of the motor launch of the said vessel were not duly licensed. In the
evening of May 4, 1948, the said ship collided with M/S Bowline Knot. M/L Consuelo V
capsized that resulted to the death of 9 passengers, including Abdulhaman’s 5 children,
and the loss of all the cargoes on board.

Abdulhaman then filed a case against Manila Steamship Co., owner of the M/S “Bowline
Knot”, and Lim Hong To, owner of the M/L “Consuelo V”, to recover damages for the
death of his children and loss of personal properties on board the M/L “Consuelo V” as a
result of the said maritime collision.

CA held that it affirmed the findings of the Board of Marine Inquiry which held the
owners of both vessels solidarily liable to plaintiff for damages caused to the latter
under Article 827 of the Code of Commerce but exempted defendant Lim Hong To from
liability due to the sinking and total loss of his vessel. Manila Steamship, owner of the
Bowline Knot, was ordered to pay all of plaintiff’s damages.

Petitioner Manila Steamship Co. then pleads to this court that it is exempt from any
liability under Article 1903 of the Civil Code because it had exercised the diligence of a
good father of a family in the selection of its employees, particularly the officer in
command of the M/S Bowline Knot.

ISSUE:
1) WON petitioner Manila Steamship Co. is exempt from any liability under Art. 1903 of
the Civil Code?
2) WON Lim Hong To is exempt from any liability?

HELD:
1) NO. While it is true that plaintiff’s action against petitioner is based on a tort or quasi
delict, the tort in question is not a civil tort under the Civil Code but a maritime tort
resulting in a collision at sea, governed by Articles 826-939 of the Code of Commerce.
Under Art. 827 of the Code of Commerce, in case of collision between two vessels
imputable to both of them, each vessel shall suffer her own damage and both shall be
solidarily liable for the damages occasioned to their cargoes. The shipowner is directly
and primarily responsible in tort resulting in a collision at sea, and it may not escape
liability on the ground that s/he exercised due diligence in the selection and supervision
of the vessel’s officers and crew.

This direct responsibility is recognized in Article 618 of the Code of Commerce under
which the captain shall be civilly liable to the ship agent, and the latter is the one liable
to third persons. The direct nature of the responsibilities on account of the collision
incurred by the shipowner under maritime law is distinguished from the civil law and
mercantile law in general.

2) NO. The legal limitation of a shipowner’s liability does not apply to cases where the
injury or the average is due to shipowner’s own fault. In the instant case, the fact that
the master and the engineer of the motor launch “Consuelo V” were not duly licensed
deliberately increased the risk to which the passengers and shippers of cargo aboard
the “Consuelo V” would be subjected and willfully augmented the dangers and hazards
to his vessel’s unwarry passengers. Hence Lim Hong To is liable since he cannot invoke
the limited liability rule since it was through his own fault that injury was caused to his
passengers.
 - Government vs. Insular Maritime Co. [G.R. No. L-21495, March 18, 1924]

SYLLABUS

1. SHIPPING; VESSELS; LIABILITY OF OWNERS OF A VESSEL FOR REPAIRS TO VESSEL

AFTER LOSS OF THE VESSEL. — The Government of the Philippine Islands terminated
repairs on the motor ship Insular on November 29, 1919. The Insular suffered a total
loss by fire on April 15, 1920. Collection of claim was attempted by the Government on
April 30, 1921, that is, after the loss of the vessel. Held: That the loss of the vessel
Insular did not extinguish the obligation and that the owners of the vessel are still liable
for the repairs.

2. ID.; ID.; ID. — The total destruction of the vessel does not affect the liability of the
owners for repairs on the vessel completed before its loss.

3. ID.; ID.; D. — The case of Philippine Shipping Company v. Garcia Vergara ([1906], 6
Phil., 281) distinguished. That case concerned the loss of a vessel by collision. This case
concerns a contractual relationship which remains unaffected by the loss of the thing,
the subject-matter of the contract.

DECISION

MALCOLM, J. :

The Government of the Philippine Islands seeks by this action to recover from The
Insular Maritime Company the sum of P30,437.91 for repairs made by the Bureau of
Commerce and Industry on the motor ship Insular.

The Insular Maritime Company was organized with a capital of P150,000. It became the
owner of one vessel only, the Insular, valued at P150,000. On October 29, 1919, The
Insular Maritime Company asked the Bureau of Commerce and Industry to perform
certain repairs on the Insular. The Government consented and terminated said repairs
on November 29 of the same year. Subsequent thereto, on April 15, 1920, the Insular
suffered a total loss by fire.

The bill prepared by the chief accountant of the Bureau of Commerce and Industry for
work done on the motor ship Insular in the amount of P30,437.91, was dated July 31,
1920. Collection of the claim was attempted pursuant to formal demand made by the
Acting Insular Auditor of date April 30, 1921.

It will thus be noted, as was emphasized by the defense and by His Honor, the trial
judge, that no steps were taken by the Government to secure payment for the repairs
until after the loss of the vessel Insular. The first error assigned by the Attorney-
General addressed to this finding of fact is accordingly without merit.

The trial judge further found in effect, as a legal conclusion, that the loss of the vessel
Insular extinguished the obligation. The Attorney-General challenges the correctness of
this view.
The decision of the trial judge was predicated on his understanding of the provisions of
article 591 of the Code of Commerce in relation with other articles of the same Code,
and with the decision of this court in the case of Philippine Shipping Co. v. Garcia
Vergara ([1906], 6 Phil., 281). As to the applicability of article 591 of the Code of
Commerce, there is nothing in the language to denote that the liability of the owners of
a vessel is wiped out by the loss of that vessel. As to the applicability of the decision in
the case of Philippine Shipping Co. v. Garcia Vergara, supra, the facts are not the same.
There, the owners and agents of a vessel causing the loss of another vessel by collision
were held "not liable beyond the vessel itself causing the collision," but were "not
required to pay such indemnification for the reason that the obligation thus incurred has
been extinguished on account of the loss of the thing bound for the payment thereof."
Here, there is a contractual relation which remains unaffected by the loss of the thing
concerned in the contract and which is governed principally by the provisions of the
Civil Code.

The rights and liabilities of owners of ships are in many respects essentially the same as
in the case of other owners of things. As a general rule, the owners of a vessel and the
vessel itself are liable for necessary repairs. Naturally the total destruction of the vessel
extinguishes a maritime lien, as there is no longer any res to which it can attach. But
the total destruction of the vessel does not affect the liability of the owners for repairs
on the vessel completed before its loss.

It is but fair to say that what has been stated in this decision more accurately expresses
the consensus of opinion in the court than it does the views of the writer, who sees
more in the appellee’s case than do his colleagues in the court.

The trial court was accordingly right in its exposition of the facts but not in its
application of the law. Judgment must therefore be as it is hereby reversed, and in lieu
of the judgment appealed from, another shall be entered here in favor of the plaintiff
and against the defendant for the sum of P30,437.91 with legal interest from July 20,
1921, when the complaint was presented, until payment. Without special finding as to
costs in either instance, it is so ordered.
 - Pedro Vasquez vs. CA [G.R. No. L-42926, Sept. 13, 1985]

PRINCIPLE/S:
1) GR: limited liability rule - liability of a shipowner is limited to the value of the vessel
Exception: Shipowner or ship agent’s insurance. (There are other exceptions aside from
this one)
2) Elements of a Fortuitous Event
a) The event must be independent of the human will,
b) The occurrence must render it impossible for the debtor to fulfill the obligation in a
normal manner,
c) The obligor must be free of participation in, aggravation of, the injury to the creditor,
* Event must have been impossible to foresee, or if it could be foreseen, must have
been impossible to avoid.
3) GR: Fortuitous Event exempts one from liability
Exception: Failure to observe extraordinary diligence by the shipowner or ship agent.
(NOTE: There are other exceptions)

FACTS: Petitioners sued for damages before the Court of First Instance defendant
Filipinas Pioneer Lines due to the loss of their children in a shipwreck involving the
vessel of defendant when it sailed despite a typhoon. The Trial Court awarded damages
but this was reversed by CA. Hence, this Petition for Review on Certiorari is filed to this
court. Respondent defended on the plea of caso fortuito and the extinction of its liability
by the actual total loss of the vessel.

ISSUE:
1) WON it is a fortuitous event
2) WON defendant is liable

HELD:
1) NO. To constitute a caso fortuito that would exempt a person from responsibility, it is
necessary that (1) the event must be independent of the human will; (2) the
occurrence must render it impossible for the debtor to fulfill the obligation in a normal
manner; and that (3) the obligor must be free of participation in, or aggravation of, the
injury to the creditor." In the language of the law, the event must have been impossible
to foresee, or if it could be foreseen, must have been impossible to avoid.

In the instant case, defendant’s case does not constitute a caso fortuito since while the
typhoon was indeed an inevitable occurrence, yet, the defendant having been kept
posted on the course of the typhoon by weather bulletins at intervals of six hours, the
captain and crew were well aware of the risk they were taking as they hopped from
island to island. In taking a calculated risk, defendant failed to observe that
extraordinary diligence required of them explicitly by law for the safety of the
passengers transported by them.

2) YES.
Reasons:
a) The case is not caso fortutito.
b) Private respondent's submission that the total loss of the vessel extinguished its
liability pursuant to Article 587 of the Code of Commerce (Limited Liability Rule - liability
of a shipowner is limited to the value of the vessel or to the insurance thereon) is
untenable since this rule admits exceptions. One such exception is if an insurance
exists. Despite the total loss of the vessel therefore, its insurance answers for the
damages that a shipowner or agent may be held liable for by reason of the death of its
passengers.
 - Abueg vs. San Diego [G.R. No. L-773, Dec. 17, 1946]

PRINCIPLE/S:
1) GR: Limited Liability Rule
Exception: Workmen’s Compensation Act
Reason: Such compensation has nothing to do with the provisions of the Code of
Commerce regarding maritime commerce.

2) Real and Hypothecary Nature

"The real and hypothecary nature of the liability of the shipowner or agent embodied in
the provisions of the Maritime Law, Book III, Code of Commerce, had its origin in the
prevailing conditions of the maritime trade and sea voyages during the medieval ages,
attended by innumerable hazards and perils. To offset against these adverse conditions
and to encourage shipbuilding and maritime commerce, it was deemed necessary to
confine the liability of the owner or agent arising from the operation of a ship to the
vessel, equipment, and freight, or insurance, if any, so that if the shipowner or agent
abandoned the ship, equipment, and freight, his liability was extinguished."

3) Coastwise and interisland trade includes ships engaged in fishing

Coastwise and interisland trade meaning = Ships engaged in carriage for hire of
passengers and/or merchandise on vessels between ports and places in the Philippines
and in fishing expeditions.
Reason why fishing is included: “xxx While fishing is an industry, if the catch is brought
to a port for sale, it is at the same time a trade xxx”

FACTS: The M/S San Diego II and the M/S Bartolome, while engaged in fishing
operations were caught by a typhoon and as a consequence of which they were sunk
and totally lost. The husbands of the plaintiffs, while acting in their capacities, perished
in the shipwreck.

Counsel for the appellant cite article 587 of the Code of Commerce which provides that
if the vessel together with all her tackle and freight money earned during the voyage
are abandoned, the agent's liability to third persons for tortious acts of the captain in
the care of the goods which the ship carried is extinguished (Yangco vs. Laserna, 73
Phil., 330); article 837 of the same code which provides that in cases of collision, the
ship owners' liability is limited to the value of the vessel with all her equipment and
freight earned during the voyage (Philippine Shipping company vs. Garcia, 6 Phil., 281),
and article 643 of the same Code which provides that if the vessel and freight are
totally lost, the agent's liability for wages of the crew is extinguished. From these
premises counsel draw the conclusion that appellant's liability, as owner of the two
motor ships lost or sunk as a result of the typhoon was extinguished.

ISSUES:
1)WON the liability of the shipowner is extinguished by the total loss of the ship?
2) WON a ship engaged in fishing expedition is considered coastwise and interisland
trade?

HELD:
1) NO. The provisions of the Code of Commerce invoked by appellant have no room in
the application of the Workmen's Compensation Act which seeks to improve, and aims
at the amelioration of, the condition of laborers and employees. Such compensation has
nothing to do with the provisions of the Code of Commerce regarding maritime
commerce. It is an item in the cost of production which must be included in the budget
of any well-managed industry. It has been repeatedly stated that the Workmen's
Compensation Act was enacted to abrogate the common law and our Civil Code upon
culpable acts and omissions, and that the employer need not be guilty of neglect or
fault, in order that responsibility may attach to him and that shipowner was liable to
pay compensation provided for in the Workmen's Compensation Act, notwithstanding
the fact that the motorboat was totally lost.

2) YES. term "coastwise and interisland trade" includes carriage for hire of passengers
and/or merchandise on vessels between ports and places in the Philippines and fishing
expeditions because if the catch is brought to a port for sale it is a trade. Even if fishing
was not considered as "coastwise and interisland trade" the deceased were still
considered industrial employees within the purview of section 39, paragraph (d) of
Workmen's Compensation Act, as amended, for industrial employment "includes all
employment or work at a trade, occupation or profession exercised by an employer for
the purpose of gain."
 - Loadstar Shipping vs. CA [G.R. No. 131621, Sept. 28, 1999]

LOADSTAR SHIPPING CO., INC., Petitioner –versus- COURT OF APPEALS and THE
MANILA INSURANCE CO., INC., Respondents. DAVIDE, JR., C.J.

For a vessel to be seaworthy, it must be adequately equipped for the voyage and
manned with a sufficient number of competent officers and crew. The failure of a
common carrier to maintain in seaworthy condition its vessel involved in a contract of
carriage is a clear breach of its duty prescribed in Article 1755 of the Civil Code.
LOADSTAR was at fault or negligent in not maintaining a seaworthy vessel and in
having allowed its vessel to sail despite knowledge of an approaching typhoon. The
doctrine of limited liability does not apply where there was negligence on the part of the
vessel owner or agent.

FACTS: On 19 November 1984, LOADSTAR received on board its M/V "Cherokee"

(hereafter, the vessel) goods for shipment. The goods, amounting to P6,067,178, were
insured for the same amount with MIC against various risks including "TOTAL LOSS BY
TOTAL OF THE LOSS THE VESSEL." The vessel, in turn, was insured by Prudential
Guarantee & Assurance, Inc. (hereafter PGAI) for P4 million. on its way to Manila from
the port of Nasipit, Agusan del Norte, the vessel, along with its cargo, sank off
Limasawa Island. As a result of the total loss of its shipment, the consignee made a
claim with LOADSTAR which, however, ignored the same. As the insurer, MIC paid
P6,075,000 to the insured in full settlement of its claim, and the latter executed a
subrogation receipt therefor. MIC filed a complaint against LOADSTAR and PGAI,
alleging that the sinking of the vessel was due to the fault and negligence of LOADSTAR
and its employees. It also prayed that PGAI be ordered to pay the insurance proceeds
from the loss the vessel directly to MIC, said amount to be deducted from MIC's claim
from LOADSTAR. In its answer, LOADSTAR denied any liability for the loss of the
shipper's goods and claimed that sinking of its vessel was due to force majeure. PGAI,
on the other hand, averred that MIC had no cause of action against it, LOADSTAR being
the party insured. In any event, PGAI was later dropped as a party defendant after it
paid the insurance proceeds to LOADSTAR. As stated at the outset, the court a quo
rendered judgment in favor of MIC, prompting LOADSTAR to elevate the matter to the
court of Appeals, which, however, agreed with the trial court and affirmed its decision
in toto. LOADSTAR submits that the vessel was a private carrier because it was not
issued certificate of public convenience, it did not have a regular trip or schedule nor a
fixed route, and there was only "one shipper, one consignee for a special cargo."
LOADSTAR argues that as a private carrier, it cannot be presumed to have been
negligent, and the burden of proving otherwise devolved upon MIC. In refutation, MIC
argues that While it is true that the vessel had on board only the cargo of wood
products for delivery to one consignee, it was also carrying passengers as part of its
regular business. Moreover, the bills of lading in this case made no mention of any
charter party but only a statement that the vessel was a "general cargo carrier." Neither
was there any "special arrangement" between LOADSTAR and the shipper regarding the
shipment of the cargo. The singular fact that the vessel was carrying a particular type
of cargo for one shipper is not sufficient to convert the vessel into a private carrier.
ISSUES: 1. W/N the M/V "Cherokee" is a common carrier? (YES) 2. Did LOADSTAR
observe due and/or ordinary diligence in these premises. (YES) RULING:

1. We hold that LOADSTAR is a common carrier. It is not necessary that the carrier be
issued a certificate of public convenience, and this public character is not altered by the
fact that the carriage of the goods in question was periodic, occasional, episodic or
unscheduled. In support of its position, LOADSTAR relied on the 1968 case of Home
Insurance Co. v. American Steamship Agencies, Inc., where this Court held that a
common carrier transporting special cargo or chartering the vessel to a special person
becomes a private carrier that is not subject to the provisions of the Civil Code. Any
stipulation in the charter party absolving the owner from liability for loss due to the
negligence of its agent is void only if the strict policy governing common carriers is
upheld. Such policy has no force where the public at is not involved, as in the case of a
ship totally chartered for the use of a single party. LOADSTAR also cited Valenzuela
Hardwood and Industrial Supply, Inc. v. Court of Appeals and National Steel Corp. v.
Court of Appeals, both of which upheld the Home Insurance doctrine. These cases
invoked by LOADSTAR are not applicable in the case at bar for the simple reason that
the factual settings are different. The records do not disclose that the M/V "Cherokee,"
on the date in question, undertook to carry a special cargo or was chartered to a special
person only. There was no charter party. The bills of lading failed to show any special
arrangement, but only a general provision to the effect that the M/V"Cherokee" was a
"general cargo carrier." Further, the bare fact that the vessel was carrying a particular
type of cargo for one shipper, which appears to be purely coincidental, is not reason
enough to convert the vessel from a common to a private carrier, especially where, as
in this case, it was shown that the vessel was also carrying passengers. Under the facts
and circumstances obtaining in this case, LOADSTAR fits the definition of a common
carrier under Article 1732 of the Civil Code. In the case of De Guzman v. Court of
Appeals, the Court juxtaposed the statutory definition of "common carriers" with the
peculiar circumstances of that case, viz.: The Civil Code defines "common carriers" in
the following terms: Art. 1732. Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting passengers or goods or
both, by land, water, or air for compensation, offering their services to the public. The
above article makes no distinction between one whose principal business activity is the
carrying of persons or goods or both, and one who does such carrying only as ancillary
activity (in local idiom, as "a sideline". Article 1732 also carefully avoids making any
distinction between a person or enterprise offering transportation service on a regular
or scheduled basis and one offering such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its
services to the "general public," i.e., the general community or population, and one who
offers services or solicits business only from a narrow segment of the general
population. We think that Article 1733 deliberately refrained from making such
distinctions. xxx xxx xxx It appears to the Court that private respondent is properly
characterized as a common carrier even though he merely "back-hauled" goods for
other merchants from Manila to Pangasinan, although such backhauling was done on a
periodic or occasional rather than regular or scheduled manner, and even though
private respondent's principal occupation was not the carriage of goods for others.
There is no dispute that private respondent charged his customers a fee for hauling
their goods; that fee frequently fell below commercial freight rates is not relevant here.
The Court of Appeals referred to the fact that private respondent held no certificate of
public convenience, and concluded he was not a common carrier. This is palpable error.
A certificate of public convenience is not a requisite for the incurring of liability under
the Civil Code provisions governing common carriers. That liability arises the moment a
person or firm acts as a common carrier, without regard to whether or not such carrier
has also complied with the requirements of the applicable regulatory statute and
implementing regulations and has been granted a certificate of public convenience or
other franchise. To exempt private respondent from the liabilities of a common carrier
because he has not secured the necessary certificate of public convenience, would be
offensive to sound public policy; that would be to reward private respondent precisely
for failing to comply with applicable statutory requirements The business of a common
carrier impinges directly and intimately upon the safety and wellbeing and property of
those members of the general community who happen to deal with such carrier. The
law imposes duties and liabilities upon common carriers for the safety and protection of
those who utilize their services and the law cannot allow a common carrier to render
such duties and liabilities merely facultative by simply failing to obtain the necessary
permits and authorizations. 2. YES. We find that the M/V "Cherokee" was not seaworthy
when it embarked on its voyage on 19 November 1984. The vessel was not even
sufficiently manned at the time. "For a vessel to be seaworthy, it must be adequately
equipped for the voyage and manned with a sufficient number of competent officers
and crew. The failure of a common carrier to maintain in seaworthy condition its vessel
involved in a contract of carriage is a clear breach of its duty prescribed in Article 1755
of the Civil Code. Neither do we agree with LOADSTAR's argument that the "limited
liability" theory should be applied in this case. The doctrine of limited liability does not
apply where there was negligence on the part of the vessel owner or agent. LOADSTAR
was at fault or negligent in not maintaining a seaworthy vessel and in having allowed its
vessel to sail despite knowledge of an approaching typhoon. In any event, it did not
sink because of any storm that may be deemed as force majeure, inasmuch as the wind
condition in the performance of its duties, LOADSTAR cannot hide behind the "limited
liability" doctrine to escape responsibility for the loss of the vessel and its cargo.
 B. Ship Chattel Mortgage

- Rubiso vs. Rivera [G.R. No. L-11407, Oct. 30, 1917]

FACTS:
Gelito & Co. was owned by Bonifacio Gelito and Chinaman Sy Qui. One of the properties
of the company was a pilot ship/merchant vessel called Valentina, whose ownership is
at question here.

A series of sales had taken place:

First, Gelito had sold is 2/3 share to Chinaman Sy Qui.

When Sy Qui acquired full ownership of the company, he sold Valentina to Florentino
Rivera for P2,500 on January 4, 1915. The sale was registered in the Bureau of
Customs over two months later on March 17, 1915.
Shorty after the sale to Rivera, a suit was brought against Sy Qui to enforce payment of
a certain sum of money. Valentina was placed at a public auction and was purchased by
Sy Qui’s creditor, Fausto Rubiso. He bought the vessel for P55.45. The sale was
registered in the Office of the Collector of Customs on January 27, 1915 and in the
commercial registry on March 14, 1925.

The first buyer, Florentino Rivera, contends that he had lost the ship when it got
stranded somewhere in Batangas. He claims that Rubiso took possession of the vessel
without his knowledge or consent. Rivera seeks to be indemnified for the profits he
could have collected from the vessel’s voyages had Rivera not taken it. But, does he
have the right to the vessel?

ISSUE:
Who is the rightful owner of the merchant vessel--Rivera or Rubiso?

RULING:
Rubiso. It is true that the sale to Rivera had taken place prior to the public auction
where Rubiso bought the vessel, but the same was entered in the customs registry only
on March 17, 1915. Rubiso, however, had acted more swiftly by registering the property
much earlier in the Office of the Collector Customs and in the commercial registry in the
same month. Although the sale to Rivera had taken place first, the registration made by
Rubiso was made earlier.

Rubiso did the smart thing by registering the property at the commercial registry.
Pursuant to Article 573 of the Code of Commerce, the acquisition of a vessel must be
registered at the commercial registry in order to bind third parties. Such registration is
necessary and indispensible in order that the purchaser’s rights may be maintained
against a claim filed by third persons.

With respect to the rights of two purchasers, whichever of them first registered his
acquisition of the vessel is the one entitled to enjoy the protection of the law. By first
registration, he becomes the absolute owner of the boat and is freed from all
encumbrances and claims by strangers.

- PNB vs. CA [G.R. No. 128661, Aug. 8, 2000]

 C. Charter Party
a. Bareboat or Demise and Contract of Affreightment

Bareboat or demise – The charterer provides crew, food and fuel. The charterer is liable
as if he were the owner, except when the cause arises from the unworthiness of the
vessel. The shipowner leases to the charterer the whole vessel, transferring to the latter
the entire command, possession and consequent control over the vessel’s navigation,
including the master and the crew, who thereby become the charter’s servants. It
transforms a common carrier into a private carrier.  The charterer becomes the owner
of the vessel pro hac vice, just for that one particular purpose only. Because the
charterer is treated as owner pro hac vice, the charterer assumes the customary rights
and liabilities of the shipowner to third persons and is held liable for the expense of the
voyage and the wages of the seamen.

Contract of Affreightment – A contract whereby the owner of the vessel leases part or
all of its space to haul goods for others.  The shipowner retains the possession,
command and navigation of the ship, the charterer merely having use of the space in
the vessel in return for his payment of the charter hired.  Kinds: a. Time charter –
vessel is chartered for a fixed period of time or duration of voyage. b. Voyage or trip
charter – the vessel is leased for one or series of voyages usually for purposes of
transporting goods for charterer

b. Concepts
i. Primage
ii. Demurrage
iii. Lay days
iv. Deadfreight
Terms:
1. Primage - bonus to be paid to the captain after the successful voyage.
2. Demurrage – the sum fixed in the charter party as a remuneration to the owner of
the ship for the detention of his vessel beyond the number of days allowed by the
charter party for loading or unloading or for sailing.
3. Deadfreight – the amount paid by or recoverable from a charterer of a ship for the
portion of the ship’s capacity the latter contracted for but failed to occupy.
4. Lay Days - days allowed to charter parties for loading and unloading the cargo.
5. Extra Lay Days – days which follow after the lay days have elapsed.

- Marimperio vs. CA [G.R. No. L-40234, Dec. 14, 1987]

MARIMPERIO COMPANIA NAVIERA v. CA, GR No. 40234, 1987-12-14

Facts:

In 1964 Philin Traders Corporation and Union Import and Export Corporation entered
into a joint business venture for the purchase of copra from Indonesia for sale in
Europe

Liu, President and General Manager of the Union took charge of... the European market
and the chartering of a vessel to take the copra to Europe.

Peter Yap of Philin on the other hand, found one P.T. Karkam in Dumai, Sumatra who
had around 4,000 tons of copra for... sale.
Toeg of Interocean was commissioned to look for a vessel and he found the vessel "SS
Paxoi" of Marimperio available. Philin and Union authorized

Toeg to negotiate for its charter but with instructions to keep confidential the fact that
they are the real charterers.

a "Uniform Time Charter" for the hire of vessel "Paxoi" was entered into by the owner,
Marimperio Compania Naviera, S.A. through its agents N. & J.

Vlassopulos, Ltd. and Matthews Wrightson, Burbridge, Ltd. to be referred to simply as

Matthews, representing Interocean... which was made to appear as charterer, although
it merely acted in... behalf of the real charterers, private respondents herein.

hire the Vessel for a period of 1 (one) trip via safe port or ports Hong Kong, Philippine
Islands and/or INDONESIA from the time the Vessel is delivered and placed at the
disposal of the Charterers

Payment of hire to be made in cash

In default of payment of the Owners to have the right of withdrawing the vessel from
the services of the Charterers, without noting any protest and without interference by
any court or any formality whatsoever and without prejudice the Owners may...
otherwise have on the Charterers under the Charter.

plaintiff Charterer cabled a firm offer to P.T. Karkam to buy the 4,000 tons of copra for
U.S. $180.00 per ton, the same to be loaded either in April or May, 1965. The offer
was... accepted and plaintiffs opened two irrevocable letters of Credit in favor of P.T.
Karkam.

the Charterer was notified by letter by Vlassopulos through Matthews that the vessel
"PAXOI" had sailed from Hsinkang at noontime on March 27, 1965 and that it had left
on hire at that time and date under the Uniform

Time-Charter.

Charterer was however twice in default in its payments which were supposed to have
been done in advance.

Although the late payments for the charter of the vessel were received and
acknowledged by Vlassopulos without comment or protest, said agent notified
Matthews, by telex on April 23, 1965 that the shipowners in accordance with Clause 6
of the Charter

Party were withdrawing the vessel from Charterer's service and holding said Charterer
responsible for unpaid hirings and all legal claims... the shipowners entered into another
charter agreement with another Charterer, the Nederlansche Stoomvart of Amsterdam,
the delivery date of which was around May 3, 1965 for a trip via Indonesia to

Antwerp/Hamburg at an increased charter cost.

the original Charterer again remitted on April 30, 1965, the amount corresponding to
the 3rd 15-day hire of the vessel PAXOI, but this time the remittance was refused.
respondents Union Import and Export Corporation and Philin Traders Corporation filed a
complaint with the Court of First Instance of Manila, Branch VIII, against the Unknown
Owners of the Vessel "SS Paxoi", for specific performance... that the defendants
(unknown owners) through their duly authorized agent in London, the N & J
Vlassopulos, Ltd., ship brokers, entered into a contract of Uniform Time-Charter with
the

Interocean Shipping Company of Manila through the latter's duly authorized broker, the
Overseas Steamship Co., Inc., for the Charter of the vessel "SS PAXOI... the Interocean
Shipping Company sublet the said vessel to the plaintiff Union Import & Export
Corporation which in turn sublet the same to the other plaintiff, the Philin Traders
Corporation... complaint was amended to identify the defendant as Marimperio
Compania Naviera S.A., petitioner herein... alleged among others that the Charter Party
covering its vessel "SS (PAXOI) was entered into by defendant with Interocean Shipping
Co. which is not a party in the complaint; that defendant has no agreement or
relationship... whatsoever with the plaintiffs; that plaintiffs are unknown to defendant;
that the charter party entered into by defendant with the Interocean Shipping Co. over
the vessel "SS PAXOI" does not authorize a sub-charter of said vessel to other parties

Court of First Instance of Manila, Branch VIII rendered its decision* in favor of
defendant Marimperio Compania Naviera, S.A., petitioner... ordering said plaintiff on the
counterclaim to pay defendant, jointly and severally, the amount of £8,011.38 or its
equivalent in Philippine currency of

P75,303.40, at the exchange rate of P9.40 to 1 for the unearned charter hire due to the
attachment of the vessel "PAXOI... the trial court reversed its stand in its amended
decision... orders the defendant, Marimperio Compania Naveria

To pay plaintiffs the sum of US$22,500.00 representing the remittance of plaintiffs to

said defendant for the first 15-day hire of the vessel 'SS PAXOI', including overtime and
an overpayment of US$254.00

Court of Appeals affirmed the amended decision of the lower court except the portion
granting commission to the intervenor-appellee, which it reversed thereby dismissing
the complaint-in-intervention

Issues:

Whether or not respondents have the legal capacity to bring the suit for specific
performance against petitioner based on the charter party

Whether or not the default of Charterer in the payment of the charter hire within the
time agreed upon gives petitioner a right to rescind the charter party... extrajudicially.

Ruling:

It is undisputed that the charter party, basis of the complaint, was entered into
between petitioner Marimperio Compania Naviera, S.A., through its duly authorized
agent in London, the N & J Vlassopulos, Ltd., and the

Interocean Shipping Company of Manila through the latter's duly authorized broker, the
Overseas Steamship Co., Inc., represented by Matthews, Wrightson Burbridge Ltd., for
the Charter of the "SS PAXOI
In a sublease, there are two leases and two distinct judicial relations although
intimately connected and related to each other, unlike in a case of assignment of lease,
where the lessee transmits absolutely his right, and his personality disappears; there
only remains in the... juridical relation two persons, the lessor and the assignee who is
converted into a lessee

In other words, in a contract of sublease, the personality of the lessee does not
disappear; he does... not transmit absolutely his rights and obligations to the sublessee;
and the sublessee generally does not have any direct action against the owner of the
premises as lessor, to require the compliance of the obligations contracted with the...
plaintiff as lessee, or vice versa

However, there are at least two instances in the Civil Code which allow the lessor to
bring an action directly (accion directa) against the sub-lessee... use and preservation
of the premises under Art. 1651, and rentals under

Article 1652... it is not the sub-lessee, but the lessor, who can bring the action

In the law of agency "with an undisclosed principal, the Civil Code in Article 1883 reads:

"If an agent acts in his own name, the principal has no right of action against the
persons with whom the agent has contracted; neither have such persons against the
principal.

In such case the agent is the one directly bound in favor of the person with whom he
has contracted, as if the transaction were his own, except when the contract involves
things belonging to the principal.

The provisions of this article shall be understood to be without prejudice to the actions
between the principal and agent."

While in the instant case, the true charterers of the vessel were the private respondents
herein and they chartered the vessel through an intermediary which upon instructions
from them did not disclose their names. Article 1883 cannot... help the private
respondents, because although they were the actual principals in the charter of the
vessel, the law does not allow them to bring any action against the adverse party and
vice-versa.

Court of Appeals affirming the amended decision of the Court of First Instance of
Manila, Branch VIII, is hereby REVERSED and SET ASIDE
 - Ouano vs. CA [G.R. No. 95900, July 23, 1992]

FACTS:
A 3,710 sq. m. lot identified as Philippine Railway Lot No. 3-A-1 was offered for sale by
public bidding by the Rehabilitation Finance Corporation (RFC) on April 1, 1958. Prior to
that bidding, Ouano and Echavez orally agreed that only Echavez would make a bid,
and that if it was accepted, they would divide the property in proportion to their
adjoining properties. They also agreed to induce the only other party known to be
interested in the property, Mrs. Bonsucan’s group, to desist from presenting a bid.

Two weeks after Echavez won the bid, a document simply entitled “Agreement” was
signed by him and Ouano. The document was prepared by Echavez in his own
handwriting stating that they would request RFC to have the said lot subdivided into 2
portions and that they would share proportionately all legal expenses that may be
assessed and incurred in connection with the acquisition of the said lot.
However, RFC never approved the sharing agreement between Echavez and Ouano.
Eventually, a Torrens title for the lot was issued in Echavez’ name only.

ISSUE: W/N the agreement between Echavez and Ouano is valid.

RULING:
Ouano and Echavez had promised to share in the property in question as a
consideration for Ouano’s refraining from taking part in the public auction, and they had
attempted to cause in fact succeeded in causing another bidder to stay away from the
auction in order to cause reduction of the price of the property auctioned. In doing so,
they committed the felony of machinations in public auctions defined and penalized in
Article 185 of the Revise Penal Code.

The agreement therefore being criminal in character, the parties not only
have no action against each other but are both liable to prosecution and the things and
price of their agreement subject to disposal according to the provisions of the criminal
code. This, in accordance with the so-called pari delicto principle set out in the Civil
Code.

Article 1409 of said Code declares as “inexistent and void from the
beginning” those contracts, among others, “whose cause, object or purpose is contrary
to law, morals good customs, public order of public policy, or “expressly prohibited x x
by law”. Such contracts “cannot be ratified;” “the right to set up the defense of illegality
(cannot) be waived;” and, Article 1410 adds, the “action or defense for the declaration
of the inexistence x x (thereof) does not prescribe.” Furthermore, according to the
Article 1411 of the same Code –

“x x. When the nullity proceeds from the illegality of the cause or object of the contract,
and the act constitutes a criminal offense, both parties being in pari delicto, they shall
have no action against each other, and both shall be prosecuted. Moreover, the
provisions of the Penal Code, relative to the disposal of effects or instruments of a
crime shall be applicable to the things or the price of the contract.”

Article 1411 also dictates the proper disposition of the land involve, i.e., “the
forfeiture of the proceeds of the crime and the instruments or tools with which it was
committed,” as mandated by the provisions of Article 45 of the Revised Penal Code, this
being obviously the provision “ of the Penal Code relative to the disposal of effects or
instruments of a crime” that Article 1411 makes “applicable to the things or the price of
the contract”.
 - NFA vs. CA [G.R. No. 96453, Aug. 4, 1999]

NATIONAL FOOD AUTHORITY, ROSELINDA GERALDEZ, RAMON SARGAN AND APELINA

A. YAP, PETITIONERS, v. THE HON. COURT OF APPEALS AND HONGFIL SHIPPING
CORPORATION, RESPONDENTS. G.R. NO. 96453, THIRD DIVISION, AUGUST 4, 1999,
PURISIMA, J.:

A charter party is classified into (1) “bareboat” or “demise” charter and (2) contract of
affreightment. Subject contract is one of affreightment, whereby the owner of the
vessel leases part or all of its space to haul goods for others. It is a contract for special
service to be rendered by the owner of the vessel. Under such contract, the ship retains
possession, command, and navigation of the ship, the charterer or freighter merely
having use of the space in the vessel in return for his payment of the charter hire.

FACTS: National Food Authority (NFA), thru its officers, entered into a “Letter of
Agreement for Vessel/Barge Hire with Hongfil for the shipment of 200,000 bags of corn
grains from Cagayan de Oro City to Manila.

The loading of bags of corn grains in the vessel commenced but it took a longer period
of 21 days, 15 hours, and 18 minutes to finish than as was certified by the arrastre firm
as there was a strike staged by the arrastre workers in view of the refusal of the
striking stevedores to attend to their work. The vessel was allowed to depart for the
port of Manila and arrived there, but unfortunately, it took a longer period of 20 days,
14 hours and 33 minutes to finish the unloading than the discharging rate certified by
the Port of Manila, due to the unavailability of a berthing space for the vessel M/V
CHARLIE/DIANE. Only 166,798 bags were unloaded at the Port of Manila. After the
discharging was completed, NFA paid Hongfil the amount of P1,006,972.11 covering the
shipment of corn grains. Thereafter, Hongfil sent its billing to NFA claiming payment for
freight covering the shut-out load or deadfreight as well as demurrage, allegedly
sustained during the loading and unloading of subject shipment of corn grains. When
NFA refused to pay the amount reflected in the billing, Hongfil brought the present
action against NFA. ISSUES: 1) Can petitioners be held liable for deadfreight? 2) Can
petitioners be held liable for demurrage? RULING: 1) Yes. It bears stressing that subject
Letter of Agreement is considered a Charter Party. A charter party is classified into (1)
“bareboat” or “demise” charter and (2) contract of affreightment. Subject contract is
one of affreightment, whereby the owner of the vessel leases part or all of its space to
haul goods for others. It is a contract for special service to be rendered by the owner of
the vessel. Under such contract, the ship retains possession, command, and navigation
of the ship, the charterer or freighter merely having use of the space in the vessel in
return for his payment of the charter hire. Under the law, the cargo not loaded is
considered a deadfreight. It is the amount paid by or recoverable from a charterer of a
ship for the portion of the ship’s capacity the latter contracted for but failed to occupy.
Explicit and succinct is the law that the liability for deadfreight is on the charterer.
(Article 680 of the Code of Commerce). 2) No. Demurrage is the sum fixed in a charter
party as a remuneration to the owner of the ships for the detention of his vessel
beyond the number of days allowed by the charter party for loading or unloading or for
sailing. Liability for demurrage, using the word in its technical sense, exists only when
expressly stipulated in the contract. Shipper or charterer is liable for the payment of
demurrage claims when he exceeds the period for loading and unloading as agreed
upon or the agreed “laydays”. The period for such may or may not be stipulated in the
contract. A charter party may either provide for a fixed laydays or contain general or
indefinite words such as “customary quick dispatch” or “as fast as the streamer can
load”. In the case at bar, the charter party provides merely for a general or indefinite
words of “customary quick dispatch”. Such stipulation implies that loading and
unloading of the cargo should be within a reasonable time. The charterer NFA could not
be held liable for demurrage for it appears that cause of delay was not imputable to
either of the parties. The cause of delay during the loading was the strike staged by the
crew of the arrastre operator, and the unavailability of a berthing space for the vessel
during the unloading. Here, the Court holds that the delay sued upon was still within
the “reasonable time” embraced in the stipulation of “Customary Quick Dispatch”.
Furthermore, considering the subject contract of affreightment contains an express
provision “Demurrage/Dispatch: NONE”, the same left the parties with no recourse but
to apply the literal meaning of such stipulation.
 - Litonjua Shipping vs. National Seamen Board [G.R. No. L-51910, Aug. 10,
1989]

LITONJUA SHIPPING COMPANY INC., PETITIONER v. NATIONAL SEAMEN BOARD AND

GREGORIO P. CANDONGO RESPONDENTS. G.R. NO. L-51910, THIRD DIVISION,
AUGUST 10, 1989, FELICIANO, J. It is well settled that in a demise or bareboat charter,
the charterer is treated as owner pro hac vice of the vessel, the charterer assuming in
large measure the customary rights and liabilities of the shipowner in relation to third
persons who have dealt with him or with the vessel. In such case, the Master of the
vessel is the agent of the charterer and not of the shipowner. The charterer or owner
pro hac vice, and not the general owner of the vessel, is held liable for the expenses of
the voyage including the wages of the seamen. FACTS: Petitioner is the duly appointed
local crewing managing office of the Fairwind Shipping Corporation. On September 11,
1976 M/V Dufton Bay an ocean-going vessel of foreign registry owned by the R.D.
Mullion ship broking agency under charter by Fairwind, while in the port of Cebu
contracted the services (among others) of Gregorio Candongo as Third Engineer for 12
months with a monthly wage of US$500.00. The agreement was executed before the
Cebu Area Manning Unit of the NSB, after which respondent boarded the vessel. On
December 28, 1976 before the expiration of contract, respondent was required to
disembark at Port Kilang, Malaysia. Describe in his seaman’s handbook is the reason “by
owner’s arrange.” Condongo filed a complaint against Mullion (Shipping company) for
violation of contract and against Litonjua as agent of shipowner.
On February 1977, National Seamen Board rendered a judgment by default for
failure of petitioners to appear during the initial hearing, rendering the same to pay
Candongo because there was no sufficient or valid cause for the respondents to
terminate the service of the complainant. Litonjua’s defense: Contends that the
shipowner, nor the charterer, was the employer of private respondent; and that liability
for damages cannot be imposed upon petitioner which was a mere agent of the
charterer. ISSUE: Whether or not Litonjua may be held liable to the private respondent
on the contract of employment RULING: YES. The first basis is the charter party which
existed between Mullion, the shipowner, and Fairwind, the charterer. It is well settled
that in a demise or bare boat charter, the charterer is treated as owner pro hac vice of
the vessel, the charterer assuming in large measure the customary rights and liabilities
of the shipowner in relation to third persons who have dealt with him or with the vessel.
In such case, the Master of the vessel is the agent of the charterer and not of the
shipowner. The charterer or owner pro hac vice, and not the general owner of the
vessel, is held liable for the expenses of the voyage including the wages of the seamen.
Treating Fairwind as owner pro hac vice, petitioner Litonjua having failed to show that it
was not such, the Court believes and so holds that petitioner Litonjua, as Philippine
agent of the charterer, may be held liable on the contract of employment between the
ship captain and the private respondent. There is a second and ethically more
compelling basis for holding petitioner Litonjua liable on the contract of employment of
private respondent. The charterer of the vessel, Fairwind, clearly benefitted from the
employment of private respondent as Third Engineer of the Dufton Bay, along with the
ten (10) other Filipino crewmembers recruited by Captain Ho in Cebu at the same
occasion. In so doing, petitioner Litonjua certainly in effect represented that it was
taking care of the crewing and other requirements of a vessel chartered by its principal,
Fairwind. Last, but certainly not least, there is the circumstance that extreme hardship
would result for the private respondent if petitioner Litonjua, as Philippine agent of the
charterer, is not held liable to private respondent upon the contract of employment.
 D. Ship-agent

- NDC vs. CA [164 SCRA 593]

NATIONAL DEVELOPMENT COMPANY, petitioner-appellant, vs. THE COURT OF APPEALS

and DEVELOPMENT INSURANCE & SURETY CORPORATION, respondents-appellees.
G.R. NO. L-49407, G.R. NO. L-49469, SECOND DIVISION, AUGUST 19, 1988, PARAS, J

Thus, the rule was specifically laid down that for cargoes transported from Japan to the
Philippines, the liability of the carrier is governed primarily by the Civil Code and in all
matters not regulated by said Code, the rights and obligations of common carrier shall
be governed by the Code of commerce and by laws (Article 1766, Civil Code). Hence,
the Carriage of Goods by Sea Act, a special law, is merely suppletory to the provision of
the Civil Code.

FACTS: National Development Company (NDC) appointed Maritime Company of the

Philippines (MCP) as its agent to manage and operate its vessel, ‘Dona Nati’, for and in
behalf of its account. In 1964, while en route to Japan from San Francisco, Dona Nati
collided with a Japanese vessel, ‘SS Yasushima Maru’, causing its cargo to be damaged
and lost. The private respondent, as insurer to the consigners, paid almost
Php400,000.00 for said lost and damaged cargo. Hence, the private respondent
instituted an action to recover from NDC. ISSUE: Which laws govern the loss and
destruction of goods due to collision of vessels outside Philippine waters? RULING: This
issue has already been laid to rest by this Court of Eastern Shipping Lines Inc. v. IAC (1
50 SCRA 469-470 [1987]) where it was held under similar circumstance "that the law of
the country to which the goods are to be transported governs the liability of the
common carrier in case of their loss, destruction or deterioration" (Article 1753, Civil
Code). Thus, the rule was specifically laid down that for cargoes transported from Japan
to the Philippines, the liability of the carrier is governed primarily by the Civil Code and
in all matters not regulated by said Code, the rights and obligations of common carrier
shall be governed by the Code of commerce and by laws (Article 1766, Civil Code).
Hence, the Carriage of Goods by Sea Act, a special law, is merely suppletory to the
provision of the Civil Code. In the case at bar, it has been established that the goods in
question are transported from San Francisco, California and Tokyo, Japan to the
Philippines and that they were lost or due to a collision which was found to have been
caused by the negligence or fault of both captains of the colliding vessels. Under the
above ruling, it is evident that the laws of the Philippines will apply, and it is immaterial
that the collision actually occurred in foreign waters, such as Ise Bay, Japan. Under
Article 1733 of the Civil Code, common carriers from the nature of their business and
for reasons of public policy are bound to observe extraordinary diligence in the vigilance
over the goods and for the safety of the passengers transported by them according to
all circumstances of each case. Accordingly, under Article 1735 of the same Code, in all
other than those mentioned is Article 1734 thereof, the common carrier shall be
presumed to have been at fault or to have acted negigently, unless it proves that it has
observed the extraordinary diligence required by law. It appears, however, that collision
falls among matters not specifically regulated by the Civil Code, so that no reversible
error can be found in respondent courses application to the case at bar of Articles 826
to 839, Book Three of the Code of Commerce, which deal exclusively with collision of
vessels. More specifically, Article 826 of the Code of Commerce provides that where
collision is imputable to the personnel of a vessel, the owner of the vessel at fault, shall
indemnify the losses and damages incurred after an expert appraisal. But more in point
to the instant case is Article 827 of the same Code, which provides that if the collision is
imputable to both vessels, each one shall suffer its own damages and both shall be
solidarily responsible for the losses and damages suffered by their cargoes.
Significantly, under the provisions of the Code of Commerce, particularly Articles 826 to
839, the shipowner or carrier, is not exempt from liability for damages arising from
collision due to the fault or negligence of the captain. Primary liability is imposed on the
shipowner or carrier in recognition of the universally accepted doctrine that the
shipmaster or captain is merely the representative of the owner who has the actual or
constructive control over the conduct of the voyage. There is, therefore, no room for
NDC's interpretation that the Code of Commerce should apply only to domestic trade
and not to foreign trade. Aside from the fact that the Carriage of Goods by Sea Act
(Com. Act No. 65) does not specifically provide for the subject of collision, said Act in no
uncertain terms, restricts its application "to all contracts for the carriage of goods by
sea to and from Philippine ports in foreign trade." Under Section I thereof, it is explicitly
provided that "nothing in this Act shall be construed as repealing any existing provision
of the Code of Commerce which is now in force, or as limiting its application." By such
incorporation, it is obvious that said law not only recognizes the existence of the Code
of Commerce, but more importantly does not repeal nor limit its application. MCP next
contends that it cannot be liable solidarity with NDC because it is merely the manager
and operator of the vessel Dona Nati not a ship agent. As the general managing agent,
according to MCP, it can only be liable if it acted in excess of its authority. As found by
the trial court and by the Court of Appeals, the Memorandum Agreement of September
13, 1962 (Exhibit 6, Maritime) shows that NDC appointed MCP as Agent, a term broad
enough to include the concept of Ship-agent in Maritime Law. In fact, MCP was even
conferred all the powers of the owner of the vessel, including the power to contract in
the name of the NDC (Decision, CA G.R. No. 46513, p. 12; Rollo, p. 40). Consequently,
under the circumstances, MCP cannot escape liability. It is well settled that both the
owner and agent of the offending vessel are liable for the damage done where both are
impleaded that in case of collision, both the owner and the agent are civilly responsible
for the acts of the captain; that while it is true that the liability of the naviero in the
sense of charterer or agent, is not expressly provided in Article 826 of the Code of
Commerce, it is clearly deducible from the general doctrine of jurisprudence under the
Civil Code but more specially as regards contractual obligations in Article 586 of the
Code of Commerce. Moreover, the Court held that both the owner and agent (Naviero)
should be declared jointly and severally liable, since the obligation which is the subject
of the action had its origin in a tortious act and did not arise from contract.
Consequently, the agent, even though he may not be the owner of the vessel, is liable
to the shippers and owners of the cargo transported by it, for losses and damages
occasioned to such cargo, without prejudice, however, to his rights against the owner
of the ship, to the extent of the value of the vessel, its equipment, and the freight. As
to the extent of their liability, MCP insists that their liability should be limited to P200.00
per package or per bale of raw cotton as stated in paragraph 17 of the bills of lading.
Also the MCP argues that the law on averages should be applied in determining their
liability MCP's contention is devoid of merit. The declared value of the goods was stated
in the bills of lading and corroborated no less by invoices offered as evidence ' during
the trial. Besides, common carriers, in the language of the court in Juan Ysmael & Co.,
Inc. v. Barrette et al., (51 Phil. 90 [1927]) "cannot limit its liability for injury to a loss of
goods where such injury or loss was caused by its own negligence." Negligence of the
captains of the colliding vessel being the cause of the collision, and the cargoes not
being jettisoned to save some of the cargoes and the vessel, the trial court and the
Court of Appeals acted correctly in not applying the law on averages (Articles 806 to
818, Code of Commerce). Finally on the issue of prescription, the trial court correctly
found that the bills of lading issued allow trans-shipment of the cargo, which simply
means that the date of arrival of the ship Dona Nati on April 18,1964 was merely
tentative to give allowances for such contingencies that said vessel might not arrive on
schedule at Manila and therefore, would necessitate the trans-shipment of cargo,
resulting in consequent delay of their arrival. In fact, because of the collision, the cargo
which was supposed to arrive in Manila on April 18, 1964 arrived only on June 12, 13,
18, 20 and July 10, 13 and 15, 1964. Hence, had the cargoes in question been saved,
they could have arrived in Manila on the above-mentioned dates. Accordingly, the
complaint in the instant case was filed on April 22, 1965, that is, long before the lapse
of one (1) year from the date the lost or damaged cargo "should have been delivered"
in the light of Section 3, sub-paragraph (6) of the Carriage of Goods by Sea Act.

- Switzerland Gen. Ins. vs. Ramirez [G.R. No. L-48264, Feb. 21, 1980]
- Commissioner vs. United States Lines Company [G.R. No. L-16850, May
30, 1962]
 E. Captain

- Coastwise Lighterage vs. CA

Coastwise Lighterage Corp. vs. Court of Appeals and Philippine General Insurance
Company
G.R. No. 114167, July 12, 1995
245 SCRA 796

FACTS:
The consignee entered into a contract of affreightment which is to transport molasses
from the province of Negros to Manila with the carrier using the latter’s barges. The
barges were towed in tandem by the tugboat MT Marica, also owned by the carrier.
While approaching the pier of destination, one of the barges, “Coastwise 9” was struck
and as a result, the molasses at the cargo tanks were contaminated and rendered unfit
for the use it was intended. The consignee rejected the shipment of molasses as a total
loss. The insurer paid the consignee the amount representing the value of the damaged
cargo of molasses.

Parties:
Consignee – Pag-asa Sales, Inc.
Carrier – Coastwise Lighterage Corporation (Coastwise)
Insurer of the cargo – Philippine General Insurance Company (PhilGen)

ISSUES:
1. WON Coastwise Lighterage was transformed into a private carrier, by virtue of the
contract of affreightment which it entered into with the consignee, Pag-asa Sales, Inc.
What is the extent of its liability over the lost, damaged and deteriorated cargo?
2. WON the insurer was subrogated into the rights of the consignee against the carrier,
upon payment by the insurer of the value of the consignee’s goods lost while on board
one of the carrier’s vessels.

RULING:
1. No. The contract of affreightment entered into between the consignee and the
carrier did not convert the latter into a private carrier, but remained a common carrier
and was still liable as such. The consignee only leased three of petitioner’s vessels, in
order to carry cargo from one point to another, but the possession, command and
navigation of the vessels remained with petitioner carrier.
As a common carrier, the presumption of negligence attaches to it when the goods it
transports are lost, destroyed or deteriorated. This presumption may be overcame only
by proof of the exercise of extraordinary diligence such as placing a person with
navigational skills. However, the carrier failed to overcome this presumption of
negligence as the patron did not possess the necessary license to navigate.

2. Petitioner carrier was liable for breach of the contract of carriage it entered into with
the consignee. In accordance with Art. 2207, payment by the insurer to the assured
operated as an equitable assignment to the former of all remedies which the latter may
have against the third party whose negligence or wrongful act caused the loss. If the
insured property is destroyed or damaged through the fault or negligence of a party
other than the assured, then the insurer, upon payment to the assured will be
subrogated to the rights of the assured to recover from the wrongdoer to the extent
that the insurer has been obligated to pay.

NOTES:
The distinction between the two kinds of charter parties (i.e. bareboat or demise and
contract of affreightment) –
Under the demise or bareboat charter of the vessel, the charterer will generally be
regarded as the owner for the voyage or service stipulated. The charterer mans the
vessel with his own people and becomes the owner pro hac vice, subject to liability to
others for damages caused by negligence. To create a demise, the owner of a vessel
must completely and exclusively relinquish possession, command and navigation
thereof to the charterer, anything short of such a complete transfer is a contract of
affreightment (time or voyage charter party) or not a charter party at all.

On the other hand a contract of affreightment is one in which the owner of the vessel
leases part or all of its space to haul goods for others. It is a contract for special service
to be rendered by the owner of the vessel and under such contract the general owner
retains the possession, command and navigation of the ship, the charterer or freighter
merely having use of the space in the vessel in return for his payment of the charter
hire. . . . . . . . . An owner who retains possession of the ship though the hold is the
property of the charterer, remains liable as carrier and must answer for any breach of
duty as to the care, loading and unloading of the cargo. . . . – Puromines, Inc. vs. Court
of Appeals,
 - Inter-Orient Maritime Enterprises vs. NLRC [235 SCRA 267]

FACTS:
Jeremias Pineda was contracted to work as Oiler on board the vessel, MV Amazonia,
from Dec. 21, 1988 to Sept. 28,1989. When he finished his contract, he was
discharged from the port of Dubai for repatriation to Manila. During his layover in
Bangkok, Thailand, he disembarked on his own free will and failed to join the
connecting flight to Hongkong. During which, he was shot by a Thai Policeman and
died. The police report submitted to the Philippine Embassy in Bangkok confirmed that
it was Pineda who ‘approached and tried to stab the police sergeant with a knife and
that therefore he was forced to pull out his gun and shot Pineda.

The deceased’s mother, Constancia Pineda, filed for death compensation benefits
against Interorient Maritime Enterprises, Inc. and it foreign principal, Fircroft Shipping
Corporation and the Times Surety and Insurance Co., Inc. They averred that the
deceased seaman was suffering from mental disorder aggravated by threats on his life
by his fellow seamen, the Ship Captain should not have allowed him to travel alone.

Respondent agency averred that they are not liable to pay any death/burial benefits
pursuant to the provisions of Par. 6, Section C, Part II, POEA-SEC which states that ‘no
compensation shall be payable in respect of any injury, incapacity, disability or death
resulting from a willfull act on his own life by the seaman’; that the deceased seaman
died due to his own wilfull act in attacking a policeman in Bangkok who shot him in self-
defense.”

ISSUE:
Whether or not the local crewing or manning agent and its foreign principal are liable
for the death of a Filipino seaman-employee who, after having been discharged, was
killed in-transit while being repatriated home

RULING:
Though the termination of the employment contract was duly effected in Dubai, still,
the responsibility of the foreign employer to see to it that Pineda was duly repatriated
to the point of hiring subsisted. Section 4, Rule VIII of the Rules and Regulations
Governing Overseas Employment clearly provides for the duration of the mandatory
personal accident and life insurance covering accidental death, dismemberment and
disability of overseas workers:

“Section 4. Duration of Insurance Coverage.—The minimum coverage shall take effect

upon payment of the premium and shall be extended worldwide, on and off the job, for
the duration of the worker’s contract plus 60 calendar days after termination of the
contract of employment’, provided that in no case shall the duration of the insurance
coverage be less than one year.”

The foreign employer may not have been obligated by its contract to provide a
companion for a returning employee, but it cannot deny that it was expressly tasked by
its agreement to assure the safe return of said worker. The uncaring attitude displayed
by petitioners who, knowing fully well that its employee had been suffering from some
mental disorder, nevertheless still allowed him to travel home alone is appalling.
 F. Pilot

- Far Eastern Shipping vs. CA [G.R. No. 130068, Oct. 1, 1998]

FAR EASTERN SHIPPING COMPANY, Petitioner, vs. COURT OF APPEALS and

PHILIPPINE PORTS AUTHORITY, Respondents. G.R. NO. 130068, G.R. NO. 130150, EN
BANC, OCTOBER 1, 1998, REGALADO, J.
Under extraordinary circumstances, a pilot must exercise extraordinary care. In this
case, Capt. Gavino failed to measure up to such strict standard of care and diligence
required of pilots in the performance of their duties. As the pilot, he should have made
sure that his directions were promptly and strictly followed. The master is not entirely
absolved of responsibility with respect to navigation when a compulsory pilot is in
charge. Except insofar as their liability is limited or exempted by statute, the vessel or
her owners are liable for all damages caused by the negligence or other wrongs of the
owners or those in charge of the vessel. As a general rule, the owners or those in
possession and control of a vessel and the vessel are liable for all natural and proximate
damages caused to persons or property by reason of her negligent management or
navigation. FACTS: M/V PAVLODAR, owned and operated by the Far Eastern Shipping
Company (FESC), arrived at the Port of Manila and was assigned Berth 4 of the Manila
International Port, as its berthing space. Gavino, who was assigned by the Appellant
Manila Pilots’ Association to conduct the docking maneuvers for the safe berthing,
boarded the vessel at the quarantine anchorage and stationed himself in the bridge,
with the master of the vessel, Victor Kavankov, beside him. After a briefing of Gavino by
Kavankov of the particulars of the vessel and its cargo, the vessel lifted anchor from the
quarantine anchorage and proceeded to the Manila International Port. The sea was
calm and the wind was ideal for docking maneuvers. When the vessel reached the
landmark, one-half mile from the pier, Gavino ordered the engine stopped. When the
vessel was already about 2,000 feet from the pier, Gavino ordered the anchor dropped.
Kavankov relayed the orders to the crew of the vessel on the bow. The left anchor, with
two (2) shackles, were dropped. However, the anchor did not take hold as expected.
The speed of the vessel did not slacken. A commotion ensued between the crew
members. After Gavino noticed that the anchor did not take hold, he ordered the
engines half-astern. Abellana, who was then on the pier apron, noticed that the vessel
was approaching the pier fast. Kavankov likewise noticed that the anchor did not take
hold. Gavino thereafter gave the “fullastern” code. Before the right anchor and
additional shackles could be dropped, the bow of the vessel rammed into the apron of
the pier causing considerable damage to the pier as well as the vessel. ISSUES: (1) Is
the pilot of a commercial vessel, under compulsory pilotage, solely liable for the
damage caused by the vessel to the pier, at the port of destination, for his negligence?;
(2) Would the owner of the vessel be liable likewise if the damage is caused by the
concurrent negligence of the master of the vessel and the pilot under a compulsory
pilotage? RULING: (1) Generally speaking, the pilot supersedes the master for the time
being in the command and navigation of the ship, and his orders must be obeyed in all
matters connected with her navigation. He becomes the master pro hac vice and should
give all directions as to speed, course, stopping and reversing anchoring, towing and
the like. And when a licensed pilot is employed in a place where pilotage is compulsory,
it is his duty to insist on having effective control of the vessel or to decline to act as
pilot. Under certain systems of foreign law, the pilot does not take entire charge of the
vessel but is deemed merely the adviser of the master, who retains command and
control of the navigation even in localities where pilotage is compulsory. It is quite
common for states and localities to provide for compulsory pilotage, and safety laws
have been enacted requiring vessels approaching their ports, with certain exceptions, to
take on board pilots duly licensed under local law. The purpose of these laws is to
create a body of seamen thoroughly acquainted with the harbor, to pilot vessels
seeking to enter or depart, and thus protect life and property from the dangers of
navigation. Upon assuming such office as a compulsory pilot, Capt. Gavino is held to the
universally accepted high standards of care and diligence required of a pilot, whereby
he assumes to have skill and knowledge in respect to navigation in the particular waters
over which his license extends superior to and more to be trusted than that of the
master. He is not held to the highest possible degree of skill and care but must have
and exercise the ordinary skill and care demanded by the circumstances, and usually
shown by an expert in his profession. Under extraordinary circumstances, a pilot must
exercise extraordinary care. In this case, Capt. Gavino failed to measure up to such
strict standard of care and diligence required of pilots in the performance of their
duties. As the pilot, he should have made sure that his directions were promptly and
strictly followed. (2) The negligence on the part of Capt. Gavino is evident; but Capt.
Kabancov is no less responsible for the collision. The master is still in command of the
vessel notwithstanding the presence of a pilot. A perusal of Capt. Kabankov’s testimony
makes it apparent that he was remiss in the discharge of his duties as master of the
ship, leaving the entire docking procedure up to the pilot, instead of maintaining
watchful vigilance over this risky maneuver. The owners of a vessel are not personally
liable for the negligent acts of a compulsory pilot, but by admiralty law, the fault or
negligence of a compulsory pilot is imputable to the vessel and it may be held liable
therefor in rem. Where, however, by the provisions of the statute the pilot is
compulsory only in the sense that his fee must be paid, and is not in compulsory charge
of the vessel, there is no exemption from liability. Even though the pilot is compulsory,
if his negligence was not the sole cause of the injury, but the negligence of the master
or crew contributed thereto, the owners are liable. But the liability of the ship in rem
does not release the pilot from the consequences of his own negligence. The master is
not entirely absolved of responsibility with respect to navigation when a compulsory
pilot is in charge. Except insofar as their liability is limited or exempted by statute, the
vessel or her owners are liable for all damages caused by the negligence or other
wrongs of the owners or those in charge of the vessel. As a general rule, the owners or
those in possession and control of a vessel and the vessel are liable for all natural and
proximate damages caused to persons or property by reason of her negligent
management or navigation

G. Bottomry and Respondentia

LOAN ON BOTTOMRY - Loan made by shipowner or ship agent guaranteed by vessel

itself and repayable upon arrival of vessel at destination. (Art. 719)

LOAN ON RESPONDENTIA - Loan taken on security of the cargo laden on a vessel, and
repayable upon safe arrival of cargo at destination. (Art. 719)
 H. Averages (Articles 806 to 812)
An extraordinary or accidental expense incurred during the voyage in order to preserve
the cargo, vessel or both, and all damages or deterioration suffered by the vessel from
departure to the port of destination, and to the cargo from the port of loading to the
port of consignment. (Art. 806)

The person whose property has been saved must contribute to reimburse the damage
caused or expense incurred if the situation constitutes general average.

Classes:
1. Particular or Simple Average
2. Gross or General Average

Where both vessel and cargo are saved, it is general average; where only the vessel or
only the cargo is saved, it is particular average.

Expenses incurred to refloat a vessel, which accidentally ran aground, in order to

continue its voyage, do not constitute general average. Not only is there absence of a
marine peril, common safety factor, and deliberateness. It is the safety of the property,
and not the voyage, which constitutes the true foundation of general average. (A.
Magsaysay, Inc. vs. Agan, G.R.No. L-6393, Jan. 31, 1955)

a. General Average vs. Particular Average

GROSS OR GENERAL – Damages or expenses deliberately caused in order to save the

vessel, its cargo or both from real and known risk. (Art. 811)
PARTICULAR OR SIMPLE - Damages or expenses caused to the vessel or cargo that did
not inure to the common benefit, and borne by respective owners. (Art. 809)

- Philippine Home Assurance Corp. vs. CA [257 SCRA 468]

PHILIPPINE HOME ASSURANCE CORPORATION, petitioner,

vs.
COURT OF APPEALS and EASTERN SHIPPING LINES, INC., respondents.
G.R. No. 106999. June 20, 1996.
KAPUNAN, J.

Rule Synopsis
Fire is generally not a natural calamity under the Philippine jurisdiction, thus loss by
reason of the same is generally deemed to be with the intervention of some negligence.
And for a shipper to recover under gross averages, compliance with the formalities
under the Code of Commerce is indispensable.

Case Summary
Various shipments were loaded on board SS Eastern Explorer of Eastern Shipping Lines,
Inc. (ESLI). The consignees were William Lines, Inc., Orca’s Company, Pan Oriental
Match Company and Ding Velayo. While in transit, the vessel exploded resulting to its
constructive total loss. The explosion was traced to a flame detected on the acetylene
cylinder located in the accommodation area near the engine room of the vessel. It
resulted to the death of and severe injuries to some of the crew members. The whole
vessel was also set on fire which led the remaining men to abandon the ship. The
vessel was towed by a tugboat and the cargoes were recovered. The consigned goods
were transshipped to the consignees albeit delayed, and via a different carrier. ESLI
charged the consignees several amounts for the additional freight and salvage charges.
The charges were paid by Philippine Home Assurance Corp. under protest (PHAC;
insurer of the consignees).

PHAC, as subrogee of the consignees, then filed a case with the RTC against ESLI to
recover the sum paid on the ground that the damage was due to the fault, negligence,
illegal act and/or breach of contract of ESLI.

ESLI raised the defenses of exercise of due diligence and fortuitous event.

The RTC dismissed PHAC’s complaint. The CA affirmed. The SC reversed; PHAC may
recover the sum paid from ESLI.

Issues resolved —
Procedural Note: the SC held that it may review the factual findings of the lower courts
given that “the findings complained of are totally devoid of support in the records, or
that they are so glaringly erroneous as to constitute grave abuse of discretion.”

1. Who, among the carrier, consignee or insurer of the goods, is liable for the additional
charges or expenses incurred by the owner of the ship in the salvage operations and in
the transshipment of the goods via a different carrier?
HELD – ESLI, THE SHIPPER.
In our jurisprudence, fire may not be considered a natural disaster or calamity since it
almost always arises from some act of man or by human means. It cannot be an act of
God unless caused by lightning or a natural disaster or casualty not attributable to
human agency. Thus, in this case, the fire causing the damage cannot be considered a
natural calamity, as contended by ESLI and as held by the lower courts, that would
exonerate the former from liability. In fact, the explosion causing the fire was due to
the negligence of ESLI’s crew.

First, the crew was negligent in placing or storing the fully loaded acetylene cylinders
near the engine room where the heat generated therefrom may cause the said
explosion by reason of spontaneous combustion. ESLI could have easily foreseen the
danger.
Second, storing the acetylene cylinders in the accommodation area unnecessarily
exposed the passengers to grave danger and injury.
Third, that the acetylene cylinder was certified as having complied with the safety
measure and standards by qualified experts supports the theory that there was
negligence in its handling.

2. Were the expenses incurred in saving the cargo considered general average?
HELD – YES.
General or gross averages include all damages and expenses which are deliberately
caused in order to save the vessel, its cargo, or both at the same time, from a real and
known risk.

Note: under the gross averages, the consignees will be required to contribute to the
cost of saving the vessel and its cargoes.
Nevertheless, ESLI failed to comply with the formalities under the Code of Commerce,
specifically Arts. 813 and 814. Thus, the consignees may not be held liable.

Judgment reversed and set aside. Respondent ordered to return to petitioner the
amount paid under protest in behalf of consignees.
 - American Home Insurance vs. CA [208 SCRA 343]

AMERICAN HOME ASSURANCE, COMPANY, Petitioner, -versus – THE COURT OF

APPEALS and NATIONAL MARINE CORPORATION and/or NATIONAL MARINE
CORPORATION (Manila),, Respondents. G.R. No. 94149, SECOND DIVISION, May 5,
1992, PARAS, J. Article 1734 of the Civil Code provides that common carriers are
responsible for loss, destruction or deterioration of the goods, unless due to any of the
causes enumerated therein. It is obvious that the case at bar does not fall under any of
the exceptions. Thus, American Home Assurance Company is entitled to reimbursement
of what it paid to Mayleen Paper, Inc. as insurer.

FACTS:

Cheng Hwa Pulp Corporation shipped 5,000 bales (1,000 ADMT) of bleached kraft pulp
from Haulien, Taiwan on board "SS Kaunlaran", which is owned and operated by herein
respondent National Marine Corporation. The said shipment was consigned to Mayleen
Paper, Inc. of Manila, which insured the shipment with herein petitioner American Home
Assurance Co. The shipment arrived in Manila and was discharged into the custody of
the Marina Port Services, Inc., for eventual delivery to the consignee-assured. However,
upon delivery of the shipment to Mayleen Paper, Inc., it was found that 122 bales had
either been damaged or lost. Mayleen Paper, Inc. then duly demanded indemnification
from respondent National Marine Corporation for the aforesaid damages/losses in the
shipment but, for apparently no justifiable reason, said demand was not heeded. As the
shipment was insured with petitioner, Mayleen Paper, Inc. sought recovery from the
former. American Home Assurance paid Mayleen Paper, Inc. hence, the former was
subrogated to the rights and interests on Mayleen Paper, Inc. The petitioner, as
subrogee, then filed a complaint for recovery of sum of money against respondent.
Respondent, National Marine Corporation, filed a motion to dismiss stating that
American Home Assurance Company had no cause of action based on Article 848 of the
Code of Commerce which provides "that claims for averages shall not be admitted if
they do not exceed 5% of the interest which the claimant may have in the vessel or in
the cargo if it be gross average and 1% of the goods damaged if particular average,
deducting in both cases the expenses of appraisal, unless there is an agreement to the
contrary." It contended that based on the allegations of the complaint, the loss
sustained in the case was P35,506.75 which is only .18% of P17,420,000.00, the total
value of the cargo. On the other hand, petitioner countered that Article 848 does not
apply as it refers to averages and that a particular average presupposes that the loss or
damages is due to an inherent defect of the goods, an accident of the sea, or a force
majeure or the negligence of the crew of the carrier, while claims for damages due to
the negligence of the common carrier are governed by the Civil Code provisions on
Common Carriers. The Regional Trial Court sustained private respondent's contention.
But the Court of Appeals, upon appeal, dismissed the petition. Hence, this petition.

ISSUE Whether respondent is liable. (YES)

RULING The Court held that under Article 1733 of the Civil Code, common carriers from
the nature of their business and for reasons of public policy are bound to observe
extraordinary diligence in the vigilance over the goods and for the safety of passengers
transported by them according to all circumstances of each case. Thus, under Article
1735 of the same Code, in all cases other than those mentioned in Article 1734 thereof,
the common carrier shall be presumed to have been at fault or to have acted
negligently, unless it proves that it has observed the extraordinary diligence required by
law (Ibid., p. 595). But more importantly, the Court ruled that common carriers cannot
limit their liability for injury or loss of goods where such injury or loss was caused by its
own negligence. Otherwise stated, the law on averages under the Code of Commerce
cannot be applied in determining liability where there is negligence (Ibid., p. 606).
Under the foregoing principle and in line with the Civil Code's mandatory requirement of
extraordinary diligence on common carriers in the car care of goods placed in their
stead, it is but reasonable to conclude that the issue of negligence must first be
addressed before the proper provisions of the Code of Commerce on the extent of
liability may be applied. The records show that upon delivery of the shipment in
question of Mayleen's warehouse in Manila, 122 bales were found to be damaged/lost
with straps cut or loose, calculated by the so-called "percentage method" at 4,360
kilograms and amounting to P61,263.41 (Rollo, p. 68). Instead of presenting proof of
the exercise of extraordinary diligence as required by law, National Marine Corporation
(NMC) filed its Motion to Dismiss dated August 7, 1989, hypothetically admitting the
truth of the facts alleged in the complaint to the effect that the loss or damage to the
122 bales was due to the negligence or fault of NMC (Rollo, p. 179). As ruled by this
Court, the filing of a motion to dismiss on the ground of lack of cause of action carries
with it the admission of the material facts pleaded in the complaint (Sunbeam
Convenience Foods, Inc. v. C.A., 181 SCRA 443 [1990]). Such being the case, it is
evident that the Code of Commerce provisions on averages cannot apply. On the other
hand, Article 1734 of the Civil Code provides that common carriers are responsible for
loss, destruction or deterioration of the goods, unless due to any of the causes
enumerated therein. It is obvious that the case at bar does not fall under any of the
exceptions. Thus, American Home Assurance Company is entitled to reimbursement of
what it paid to Mayleen Paper, Inc. as insurer. Accordingly, it is evident that the
findings of respondent Court of Appeals, affirming the findings and conclusions of the
court a quo are not supported by law and jurisprudence.
 - Magsaysay Inc. vs. Agan [96 Phil 504]
Ponente: Reyes, A. J.
FACTS:

· On October 6, 1949, the S S "San Antonio," a vessel owned and operated by A.

Magsaysay Inc., left Manila en route to Basco, Batanes, via Aparri, Cagayan. The vessel
contained general cargo belonging to different shippers, among them Anastacio Agan.

· The vessel reached Aparri on October 10, 1949. The next day, it weighed its
anchor to proceed to Basco, Batanes. But while still in port, the vessel ran aground at
the mouth of the Cagayan River.

· Attempts to refloat the vessel under its own power failed, prompting Magsaysay,
Inc. to have it refloated by the Luzon Stevedoring Co. at an agreed cost.

· Once afloat, the vessel returned to Manila to refuel and then proceeded to
Basco, the port of destination. In Basco, the cargoes were delivered to their respective
owners or consignees, who, with the exception of Agan, made a deposit or signed a
bond to answer for their contribution to the general average.

· Because of Agan's refusal to pay his share in the costs spent to refloat the
vessel, Magsaysay, Inc. filed an action for collection before the CFI of Manila. According
to the average adjuster, Agan was supposed to pay P841.40.

· Agan's defense: He was justified in refusing to pay the amount being collected
from him because the stranding of the vessel in Aparri was due to the fault, negligence
and lack of skill of its master. Agan likewise argued that the expenses incurred in
putting the vessel afloat did not constitute general average, and that the liquidation of
the average was not made in accordance with law.

· CFI ruled in favor of Magsaysay, Inc. Hence, the instant appeal.

RULING:

Petition granted. CFI ruling reversed.

Whether the expenses incurred in floating the vessel constitute general average to
which both ship and cargo should contribute. – NO.

· In order that the expenses incurred by Magsaysay, Inc. in refloating its vessel
come within the legal concept of the general average, the following requisites (as listed
by Tolentino in his commentaries on the Code of Commerce) must concur:

o First, there must be a common danger. This means, that both the ship and the
cargo, after it has been loaded, are subject to the same danger, whether during the
voyage, or in the port of loading or unloading; that the danger arises from the accidents
of the sea, dispositions of the authority, or faults of men, provided that the
circumstances producing the peril should be ascertained and imminent or may rationally
be said to be certain and imminent. This last requirement exclude measures undertaken
against a distant peril.
o Second, that for the common safety, part of the vessel or of the cargo or both is
sacrificed deliberately.

o Third, that from the expenses or damages caused follows the successful saving of
the vessel and cargo.

o Fourth, that the expenses or damages should have been incurred or inflicted after
taking proper legal steps and authority.

· In the present case, none of the requisites listed above was met.

First requisite - not met

· The evidence does not show that the expenses sought to be recovered from
Agan were incurred to save the vessel and cargo from a common danger. The vessel
ran aground in fine weather inside the port at the mouth of a river, a place described as
"very shallow". It would thus appear that vessel and cargo were at the time in no
imminent danger or a danger which might "rationally be sought to be certain and
imminent."

· It is true that if the vessel were left indefinitely at the mercy of the elements, it
would run the risk of being destroyed. But as stated in the first requisite, "this last
requirement excludes measures undertaken against a distant peril." It is the deliverance
from an immediate, impending peril, by a common sacrifice, that constitutes the
essence of general average.

· In the present case, there is no proof that the vessel had to be put afloat to
save it from imminent danger. What appears from the testimony of Magsaysay, Inc.'s
manager is that the vessel had to be salvaged in order to enable it "to proceed to its
port of destination." It must be noted, however, that it is the safety of the property,
and not of the voyage, which constitutes the true foundation of the general average.

Second requisite - not met

· The expenses in question were not incurred for the common safety of the vessel
and its cargo, since neither of them was not in imminent peril. The cargo could, without
need of expensive salvage operation, have been unloaded by the owners/shippers if
they had been required to do so.

Third requisite - not met

· It is to be conceded that the salvage operation was a success. But as the
sacrifice was for the benefit of the vessel — to enable it to proceed to destination —
and not for the purpose of saving the cargo, the cargo owners are not in law bound to
contribute to the expenses.

Fourth requisite - not proved

· This final requisite has not been proved, for it does not appear that the
expenses in question were incurred after following the procedure laid down in Article
813.

· Given the foregoing, Agan cannot be compelled to contribute to the costs

incurred by Magsaysay, Inc. in refloating its vessel.
· While the expenses incurred in putting Magsaysay, Inc.'s vessel afloat may well
come under number 2 of Article 809 — which refers to expenses suffered by the vessel
"by reason of an accident of the sea of the force majeure" — and should therefore be
classified as particular average, the said expenses do not fit into any of the specific
cases of general average enumerated in Article 811.

· No. 6 of Article 811 does mention "expenses caused in order to float a vessel,"
but it specifically refers to "a vessel intentionally stranded for the purpose of saving it"
and would have no application where, as in the present case, the stranding was not
intentional.

· In fact, the stranding of the subject vessel in Aparri was due to the sudden
shifting of the sandbars at the mouth of the river which the port pilot did not anticipate.
The standing may, therefore, be regarded as accidental.

Nature and kinds of averages

· The law on averages is contained in the Code of Commerce. Averages are
classified into simple or particular and general or gross. Generally speaking, simple or
particular averages include all expenses and damages caused to the vessel or cargo
which have not inured to the common benefit, and are, therefore, to be borne only by
the owner of the property which gave rise to same; while general or gross averages
include all the damages and expenses which are deliberately caused in order to save
the vessel, its cargo, or both at the same time, from a real and known risk. Being for
the common benefit, gross averages are to be borne by the owners of the articles
saved.

· In classifying averages into simple o particular and general or gross and defining
each class, the Code (Art. 809 and 811) at the same time enumerates certain specific
cases as coming specially under one or the other denomination.

I. Arrival under stress (Articles 819 to 821)

The arrival of a vessel at the nearest and most convenient port instead of the port of
destination, if during the voyage the vessel cannot continue the trip to the port of
destination.

J. Collision

a. Doctrine of inscrutable fault

under the doctrine of inscrutable fault, where fault is established but
the it cannot be determined which of the two vessels were at fault,
both shall be deemed to have been at fault.

Case in which it cannot be decided which of the two vessels had

caused the collision; court determines that collision is caused by fault
but cannot determine which of the vessels is at fault

b. Doctrine of error in extremis

The sudden movement made by a faultless vessel during the third
zone of collision with another vessel which is at fault under the second
zone. Even if sudden movement is wrong, no responsibility will fall on
the faultless vessel.
 - Urrutia vs. Baco River Plantation [26 Phil 623]

[COLLISION] 17 G. Urrutia & Co. v. Baco River Plantation March 25, 1913 | Moreland, J.
| Petitioner/s: G. URRUTIA & COMPANY Respondent/s: BACO RIVER PLANTATION CO,
M. GARZA (intervener-appellant) Doctrine: There is a presumption in favor of a sailing
vessel when it has collided with a steamer. In collisions between vessels, there are
three divisions of time or zones: First: the time up to the moment when the risk of
collision may be said to have begun Second: the time between the moment when the
risk of collision begins and the moment when it has become a practical certainty Third:
the time between the moment when collision has become a practical certainty and the
moment of actual contact Facts: Steamship Nuestra Señora del Pilar owned by G.
Urrutia & Co. and schooner Mangyan owned by Baco River Plantation Co. collided on
April 8, 2010 in Verde Island North Passage. Nuestra by seen by those on board
Mangyan some time before the actual collision, sailing erratically. Mangyan kept its
course until just before the actual contact when its helmsman threw its hard to part in
an effort to avoid the collision. However, it was unsuccessful and Mangyan rammed
Nuestra on the starboard quarter. Nuestra sank and eight (8) people died.
Mangyan was considerably injured. G. Urrutia filed an action against Baco to recover
the value of the steamer and damages, alleging that Mangyan was negligent. o Baco
denied the material allegations of the complaint and set up a counterclaim for damages
for the injuries sustained by Mangyan, alleging that they were due to the gross
negligence of those handling Nuestra. M. Garza made an application to intervene,
alleging that the Nuestra was carrying for him several thousand pesos’ worth of
merchandise as freight, which was lost due to the collision. The trial court held that
those managing Nuestra were guilty of gross negligence, hence G. Urrutia cannot
recover. o The case turned upon the question of which of the vessels was negligent in
failing to conform to the International Rules for the Prevention of Collisions at Sea
(IRPCS). o Mangyan had its light properly on. o Nuestra, being bound to keep out of
the course of Mangyan, and suddenly seeing it very close, went over hard to port and
crossed its course. o Mangyan, notwithstanding the erratic movements of Nuestra,
proceeded directly on its course regardless of consequences when it could have easily
manuevered to avoid the collision. Hence, it is also not entitled to recover damages.

Ruling: W/N Baco was negligent and is not entitled to recover damages – NO, Baco is
entitled to damages. Art. 20 of the IRPCS: “If two ships, one of which is a sailing
ship and the other a steam ship, are proceeding in such directions as to involve risk of
collision, the steam ship shall keep out of the way, of the sailing ship.” Art. 21:
“where by any of these rules one of two vessels is to keep out of the way, the other
shall keep her course and speed.” In collisions between vessels, there are three
divisions of time or zones: o First: the time up to the moment when the risk of collision
may be said to have begun o Second: the time between the moment when the risk of
collision begins and the moment when it has become a practical certainty o Third: the
time between the moment when collision has become a practical certainty and the
moment of actual contact It was during the third zone that Mangyan changed its
course to port to avoid the collision. o It may be said that thi sact was done in extremis,
and even if wrong, Mangyan is not responsible for the result. But the question arises
over Mangyan’s action in keeping her course through the second zone. There is a
presumption in favor of Mangyan in cases of this character.1 o Several authors state
that a steamer should keep out of the way of a sail vessel. o It was also consistently
held in several cases that the sailing vessel has a right to keep her course and it is the
duty of the steamer to adopt measures to avoid the sailing vessel. (Note: check original
text for the cited cases.) Following the authorities and considering the facts of the
case, Baco is entitled to recover such damages as reasonably and naturally flowed from
the collision. It was proved upon the trial that it would require an expenditure of
P3,525 to put the sail vessel in the condition in which it was before the injury; that it
cost 245 to get the vessel to Manila after the injury; that the value of the supplies lost
was P240.99. The trial court was correct in dismissing the complaint of the
intervener, having no legal interest in the matter in litigation. The ruling in Philippine
Shipping Co. v. Vergara, wherein it was held that a defendant cannot be held liable for
damages when the ship was wholly lost because of the accident, is not applicable, for
the reason that the vessel lost was insured and the owner was able to collect the
insurance. Dispositive Judgment affirmed. Notes 1

Subject to the general rules of evidence in collision cases as to the burden of proof, in
the case of a collision between a steam vessel and a sail vessel, the presumption is
against the steam vessel, and she must show that she took the proper measures to
avoid a collision.
 - Williams vs. Yatco [27 Phil 68]

FACTS:
The steamer Subic, owned by the defendant, collided with the lunch Euclid owned by
the plaintiff, in the Bay of Manila at an early hour on the morning of January 9, 1911,
and the Euclid sank five minutes thereafter. This action was brought to recover the
value of the Euclid.

The court below held from the evidence submitted that the Euclid was worth at a fair
valuation P10,000; that both vessels were responsible for the collision; and that the loss
should be divided equally between the respective owners, P5,000 to be paid the plaintiff
by the defendant, and P5,000 to be borne by the plaintiff himself. From this judgment
both defendant and plaintiff appealed.

ISSUE:
Whether or not plaintiff should not be held liable on account of doctrine of last clear
chance—the defendant having the last opportunity to avoid the collision.

HELD:
No.
In cases of a disaster arising from the mutual negligence of two parties, the party who
has a last clear opportunity of avoiding the accident, notwithstanding the negligence of
his opponent, is considered wholly responsible for it under the common-law rule of
liability as applied in the courts of common law of the United States. But this rule
(which is not recognized in the courts of admiralty in the United States, wherein the
loss is divided in cases of mutual and concurring negligence, as also where the error of
one vessel has exposed her to danger of collision which was consummated by he
further rule, that where the previous application by the further rule, that where the
previous act of negligence of one vessel has created a position of danger, the other
vessel is not necessarily liable for the mere failure to recognize the perilous situation;
and it is only when in fact it does discover it in time to avoid the casualty by the use of
ordinary care, that it becomes liable for the failure to make use of this last clear
opportunity to avoid the accident. (See cases cited in Notes, 7 Cyc., pp. 311, 312, 313.)
So, under the English rule which conforms very nearly to the common-law rule as
applied in the American courts, it has been held that the fault of the first vessel in
failing to exhibit proper lights or to take the proper side of the channel will relieve from
liability one who negligently runs into such vessels before he sees it; although it will not
be a defense to one who, having timely warning of the danger of collision, fails to use
proper care to avoid it. (Pollock on Torts, 374.). In the case at bar, the most that can
be said in support of plaintiff's contention is that there was negligence on the part of
the officers on defendant's vessel in failing to recognize the perilous situation created
by the negligence of those in charge of plaintiff's launch, and that had they recognized
it in time, they might have avoided the accident. But since it does not appear from the
evidence that they did, in fact, discover the perilous situation of the launch in time to
avoid the accident by the exercise of ordinary care, it is very clear that under the above
set out limitation to the rule, the plaintiff cannot escape the legal consequences of the
contributory negligence of his launch, even were we to hold that the doctrine is
applicable in the jurisdiction, upon which point we expressly reserve our decision at this
time.
 - Lopez vs. Duruelo [52 Phil 229]

AGUSTO LOPEZ VS JUAN DURUELO ET, AL GR NO 29166 FACTS: On February 10, 1927
Agusto Lopez was eager to board upon the interisland steamer San Juacinto going to
Ilo-Ilo. During that moment the steamer was still anchored on the ground in the port of
Silay. Because the streamer was still anchored, Lopez boarded the motor boat of Jison,
who was engaged in conveying passengers and luggage back and forth from landing
boats at acnchor which was owned and operated by Jison with Duruelo as patron.
During this trip, the mechanic on board was Rodolin Duruelo, a minor. He is alleged to
have no experience in running motor boats. It was also alleged that during this trip, the
motor boat was overloaded having the capacity of 8 to 9 passenger but it was boarded
by 14 passengers. As the boat was nearing Streamer San Jacinto, it came too near to
the stern of the ship, and the propeller of the ship had not yet ceased to turn, the
blades of the propeller struck the motor boat and due to that, the ship sank. In the
complaint, it was alleged that the approach of the motor boat Jison to the propeller of
the Streamer was due to the fault, negligence and lack of skill of the defendant
Duruelo, as the patron of Jison. As the motor boat sank, Lopez was thrown of the boat
into the water against the propeller and the blades inflicted injuries towards him. Due to
the severity of the injuries Lopez was hospitalized for 8 months. In his complaint he
prayed for damages amounting 120, 000 pesos. ISSUE/S: a. Whether or not the motor
boat Jison is a vessel contemplated under the Code of Commerce pertaining to protest
case of collision. b. Whether or not a protest is required and that the making of protest
must be alleged in the complaint in order to show a good cause of action. c. Whether
the lower court is correct in dismissing the case due to demurrer. RULING/S: a. No.
Motor boat Jison is not a vessel contemplated under 835 of the Code of Commerce.
According to the Supreme Court the word vessel used in the Code of Commerce
pertains to , they refer solely and exclusively to merchant ships, as they do not include
war ships, and furthermore, they almost always refer to craft which are not accessory
to another as is the case of launches, lifeboats, etc. Moreover, the mercantile laws, in
making use of the words ship, vessel, boat, embarkation, etc., refer exclusively to those
which are engaged in the transportation of passengers and freight from one port to
another or from one place to another; in a word, they refer to merchant vessels and in
no way can they or should they be understood as referring to pleasure craft, yachts,
pontoons, health service and harbor police vessels, floating storehouses, warships or
patrol vessels, coast guard vessels, fishing vessels, towboats, and other craft destined
to other uses, such as for instance coast and geodetic survey, those engaged in
scientific research and exploration,

craft engaged in the loading and discharge of vessels from same to shore or docks, or
in transhipment and those small craft which in harbors, along shore, bays, inlets, coves
and anchorages are engaged in transporting passengers and baggage. Jurisprudence
dictates that a small vessel used for the transportation of merchandise by sea and for
the making of voyages from one port to another of these Islands, equipped and
victualed for this purpose by its owner, is a vessel, within the purview of the Code of
Commerce Here, water boat Jison based on the complaint was propelled by a second-
hand motor, originally used for a tractor plow; and it had a capacity for only eight
persons. The use to which it was being put was the carrying of passengers and luggage
between the landing at Silay and ships in the harbor. This was not such a boat as is
contemplated in the Code of Commerce. b. No. Protest is not required. According to the
Supreme Court the section under the Code of Commerce dealing with collisions are
those collisions of sea-going vessels. The said article cannot be applied to small boats
engaged in river and bay traffic. The article was evidently intended to define the law
relative to merchant vessels and marine shipping; and, as appears from said Code, the
vessels intended in that Book are such as are run by masters having special training,
with the elaborate apparatus of crew and equipment indicated in the Code. Here, since
motor boat Jison was not fall as a vessel define under the code of commerce pertaining
to collisions, it is therefore not required to make protest as a condition precedent to his
right of action for the injury suffered by him due to the collision described in the
complaint. The Code of Commerce is not applicable in this case. c. No. The lower court
is not correct. According to the Supreme Court, As a general ground of demurrer it is
assigned by the defendants that the complaint does not show a right of action, and in
the course of the argument submitted with the demurrer attention is directed to the
fact that the complaint does not allege that a protest had been presented by the
plaintiff, within twenty-four hours after the occurrence, to the competent authority at
the port where the accident occurred a condition precedent to the maintenance of an
action in a case where protest is required and that the making of protest must be
alleged in the complaint in order to show a good cause of action The Supreme Court
had mentioned that a cause of action can be made out; and the fact that a complaint is
inartificially drawn or in a certain degree lacking in precision constitutes no sufficient
reason for dismissing it. In passing upon a demurrer, every reasonable intendment is to
be taken in favour of the pleader.

However, the Supreme Court also stated that Jinson is not required to make protest as
a condition precedent to his right of action for the injury suffered by him in the collision
described in the complaint. In other words, the article used by the defense under the
code of commerce does not apply since Jison does not fall under the definition of
vessels under the said article. But even if said provision had been considered applicable
to the case in hand, a fair interpretation of the allegations of the complaint indicates,
the Supreme Court thinks, that the injuries suffered by the plaintiff in this case were of
such a nature as to excuse protest; for, under article 836 of the code of commerce, it is
provided that want of protest cannot prejudice a person not in a condition to make
known his wishes.